At the plenary session of the Georgian Parliament held on 30 April 2014, representative of the Parliamentary Minority, Zurab Japaridze, discussed the problems facing the Georgian economy and stated: “The budget of the Ministry of Regional Development and Infrastructure had a deficit of GEL 200 million. The budget designated for the rehabilitation of municipal infrastructure fell short by GEL 55 million resulting in only a 70% budget execution. The budget for water supply posted a deficit of GEL 60 million with an execution rate of 55%.  GEL 50 million was earmarked for the Village Support Programme but the execution equalled 0%. A total of GEL 450 million was designated for the implementation of regional projects but, at the end of the year, the amount spent for this purpose equalled GEL 0. The budget for the Teachers’ Professional Education Support Programme fell short by GEL 5.6 million when compared to the planned budget and approximately GEL 4 million less was spent for this purpose than in 2012. In the case of vocational education, the plan for 2013 saw a shortfall of GEL 5.5 million and spent GEL 4 million less than in 2012. GEL 5 million was marked for the Science Restoration Programme but, in the end, GEL 0 was administered for this purpose. The projected budget for the government’s learning grants for master’s degrees and doctoral grants ran a deficit of GEL 11 million with GEL 3 million less having been spent in this direction than in 2012. The budget of the Ministry of Labour, Health and Social Affairs fell short by GEL 200 million and the healthcare programme’s budget, in particular, saw a shortfall of GEL 266 million.”

FactCheck

inquired about the expenditures of the state budget of Georgia and verified the facts indicated by the MP.

Table 1:  Execution of 2013 Budget Expenditures Source: Ministry of Finance of Georgia; mof.ge

First and foremost, it should be clarified that the Budgetary Code of Georgia mentions no such term as a ‘budgetary shortfall.’ The Code employs the term ‘budgetary plan execution/failure of execution.’ In general, the term ‘budgetary shortfall’ can be used when the budgetary revenues fall short of the projected amount or the expenditures foreseen in the budget have not been fully executed. Accordingly, the meaning of this term in a particular statement depends upon the author of the statement and his personal interpretation of the concept.

It is also worthwhile noting that the employment of less funds than foreseen in the budgetary plan can be described as an economically negative factor as the planned expenditures have their own purpose and are designated for the implementation of specific projects and activities. Employment of less financial resources than envisaged in the plan implies that some of the activities planned for the year have not been implemented. However, there are cases when the activities are implemented according to the plan but they use up less resources than originally projected in the budget. At first sight this fact seems to be very favourable as the planned projects were executed with less resources, however, this scenario has certain negative aspects as well (although outweighed by the positive aspects of the fact). When the implementation of specific operations requires less funds than were expected in the budgetary plan, it is entailed that the expenditures were not projected accurately and the saved funds could have been employed for the execution of other projects (the projects which were urgent in that year and could not have been delayed to the next). Consequently, in any of the abovedescribed scenarios, the failure of the execution of budget expenditures is an unfavourable fact for the economy.

As can be gathered from the above table, the budget of the Ministry of Regional Development and Infrastructure fell short by GEL 102 million when compared to the projected budget of 2013 while in comparison to the revised budget the shortfall amounted to GEL 205 million. The budget designated for the rehabilitation of regional and municipal infrastructure fell short by GEL 55 million when compared to the initial plan having an execution rate of 70%. The budget earmarked for the restoration-rehabilitation of the water supply infrastructure saw a shortfall of GEL 60 million with the execution rate equalling 55%. The budget allocated for the support of teachers’ professional development fell short by GEL 5.6 million when compared to the approved budget while the budget designated for vocational education had a shortfall of GEL 5.5 million. The budget of the government’s learning grants for master’s degrees, doctoral programmes and youth encouragement programmes revealed a shortfall of GEL 11 million as compared to the initial approved plan. The shortfall in the budget of the Ministry of Labour, Health and Social Affairs amounted to GEL 219 million while the funds earmarked for the healthcare programme fell short by GEL 266 million. This data confirms the figures indicated by the MP.

As for the Village Support Programme, the Regional Projects Fund and the Science Rehabilitation Programme, at first glance the above table seemingly confirms that GEL 0 was administered for these programmes but, in actuality, this impression is false. The data shown in Table 1 is taken from the 2013 Budget Execution Report (

specifically, Chapter 6, entitled “Allocation of Allotments of the State Budget according to Programme Classification”). The data given in the factual execution (0) implies that the funds were allocated to municipalities and spending institutions (funds are transferred to the municipalities and the spending institutions only based upon their detailed plan of the funds’ allocation) and, consequently, their spending was recorded by the municipalities and spending institutions. Detailed information on the expenditures of the Village Support Programme and the Regional Projects Fund can be found in the same execution report of the 2013 state budget under a different chapter (specifically, Chapter 3, entitled “State Budget Allotments”).

Table 2:  Indices on the Village Support Programme and the Regional Projects Fund Source: Ministry of Finance of Georgia; mof.ge

As can be seen from Table 2, only GEL 270 thousand of the GEL 50 million total funds allocated for the Village Support Programme remain unspent while only GEL 67 million of the GEL 448 million total funds designated for regional projects are not administered. As for the Science Rehabilitation Programme, its indices are retained at universities and are not reflected in the budget execution report. However, Table 1 does reveal that only GEL 0.2 thousand was earmarked for the Science Rehabilitation Programme according to the revised budget (that is to say; all but the remaining GEL 0.2 thousand had already been transferred to spending institutions).

Evidently, in this part of his statement the MP was clearly mistaken. We allow for the possibility that the MP simply did not pay attention to the chapter of the report which presents detailed information on budget executions and, therefore, overlooked the crucial data related to the points he discussed in his statement.

For a more comprehensive analysis of the budget sectors discussed above, we also examined the data of 2012.

Table 3:  Execution of 2012 Budget Expenditures Source: Ministry of Finance of Georgia; mof.ge

The data presented in Table 3 reveals that the budget of the Ministry of Regional Development and Infrastructure had a shortfall of GEL 62 million when compared to the projected budget which is GEL 102 million less than the shortfall registered in the same sector in 2013. In 2012, the budget for the rehabilitation of regional and municipal infrastructure fell short by GEL 971 thousand which is far less than the shortfall of 2013 (GEL 55 million). The budget for the restoration-rehabilitation of the water supply infrastructure saw a shortfall of GEL 31 million, again being outstripped by the indicator of 2013 (GEL 59 million). The budget of the Teachers’ Professional Education Support Programme fell short by GEL 1.5 million which is significantly less than the shortfall of 2013 (GEL 5.6 million). In 2012 the budget designated for vocational education saw a shortfall of GEL 2 million while the same indicator of the following year stood at GEL 5 million. The budget of the government’s learning grants for master’s degrees, doctoral programmes and youth encouragement programmes had a shortfall of GEL 5 million which is notably less that the indicator of 2013 (GEL 11 million). The budget of the Ministry of Labour, Health and Social Affairs fell short by GEL 28 million in 2012, once again being notably lower than the indicator recorded in 2013 (GEL 218 million). As for the healthcare programme budget in particular, it endured a shortfall of GEL 17 million in 2012 being far less than the indicator of 2013 (GEL 266 million).

As becomes evident from these indicators, we observe a notably more favourable situation in the expenditures of the abovementioned budget sectors in 2012 than in 2013.

Table 4:  Indices on the Village Support Programme and the Regional Projects Fund Source: Ministry of Finance of Georgia; mof.ge

As for the Village Support Programme, its unemployed funds amassed GEL 89 thousand in 2012 which is less than the same indicator of 2013 (GEL 269 thousand). In the case of  regional projects, a total of GEL 9 million remained unspent which is again less than the same indicator of 2013 (GEL 67 million). We tried to examine the previous year’s record of the Science Rehabilitation Programme but it did not exist in 2012 and so we chose the programme most closely related to the one under review for our analysis; that is, the Support for Science and Scientific Research Programme. As can be drawn from Table 3, a total of GEL 27 million was earmarked for this programme and at the end of the year we observe a shortfall of GEL 9 million.

Table 5:  Indices of Educational Programmes of 2012 and 2013 Source: Ministry of Finance of Georgia, mof.ge  

As can be gathered from Table 5, approximately GEL 4 million less was spent on the Teachers’ Professional Education Support Programme and vocational education in 2013 than in 2012 while the budget of the government’s learning grants for master’s degrees, doctoral programmes and youth encouragement programmes spent roughly GEL 3 million less in 2013 than in the preceding year. These figures precisely correspond to the numbers named by Zurab Japaridze.

Conclusion

In the course of our inquiry about the accuracy of Zurab Japaridze’s statement it was established that apart from the Village Support Programme, the Regional Projects Fund and the Science Rehabilitation Programme, the figures indicated by the MP are accurate. Additionally, our analysis of the 2013 indices against those of 2012 revealed the negative dynamics in the expenditures of the budget sectors indicated by the MP which was manifested in the notably larger deficits.

We conclude that Zurab Japaridze’s statement is MOSTLY TRUE.

Originally published in The Financial, issue N. 23 (403)