“The eight-month budget has been executed and there is a surplus. The ninth, 10th, 11th and 12th month budgets will be executed in the same way.”
On 3 September 2014, Nodar Khaduri stated that the state budget has no problems and the eight-month plan has been executed with a surplus according to the current data.
FactCheckverified the Minister’s statement.
In July 2014, the Ministry of Finance submitted the six-month budget execution summary. According to the summary, receipts experienced a shortage of GEL 115 million for the budget to be executed whilst outstanding payments amounted to GEL 401 million. Improper execution of investment expenditures led to the outstanding payments. In the first quarter of 2014, the actual expenditures on investment projects amounted to 62.5% of the budget.
The Ministry of Finance draws up a quarterly budget plan and then publishes execution summaries at a later date. Owing to the fact that the third quarter remains in progress, this execution summary will be forthcoming. This notwithstanding, we can evaluate budget plan execution flows in the third quarter based upon the daily data published by the State Treasury of Georgia.
According to the data of the State Treasury of Georgia, the receipts [1]in the first eight months of 2014 equalled GEL 5,464 million. The receipts of the first three quarters (nine months) of 2014 are expected to be GEL 6,538 million. Therefore, the actual receipts of the first eight months amounted to 83.6% of the nine-month plan.
According to the 2014 budget plan, the budget revenues are defined as GEL 5,308 million of which GEL 4,909 million will be generated from tax revenues. Tax revenues in the first eight months of 2014 amounted to GEL 4,373 million which comprises 89.1% of the nine-month plan. As of 23 September 2014, tax revenues totalled GEL 4,935 million, comprising 100.5% of the nine-month plan, whereas the total receipts are GEL 6,228 million – or 95.2% of the plan. In order to execute the nine-month plan of receipts by 100%, GEL 312 million revenueneeds to be mobilised in the last five business days of the month of September. The difference between the execution of revenues and receipts is caused mainly by the increase of the foreign debt by a lesser amount than expected. More precisely, the actual foreign debt taken amounted to GEL 247 million whilst the planned amount was GEL 629 million. It should also be mentioned that the increase in liabilities was planned to be GEL 1,119 million. The actual eight-month execution in liabilities was GEL 731 million in which the actual increase in domestic liability comprised 98.7% of the budget plan whilst the actual increase in foreign liabilities with respect to the nine-month plan was estimated at 39.3%.
As for the expenditures part, the planned expenditures during the first nine months of the current year were estimated at GEL 5,563 million. Based upon the data of the State Treasury of Georgia, the actual expenditures in the first eight months amounted to GEL 4,576 million which is equal to 82.3% of the budget plan. Of note is that the planned expenditures envisaged in the eight-month summary are reduced to the amount of GEL 5,553 million instead of the initial GEL 5,563 million. In total, the volume of payments in the nine-month plan is GEL 6,748 million of which GEL 5,880 million (87.1% of the plan) have been executed as of 23 September. Taking into account that the year’s third quarter ends on 30 September, the state needs to spend GEL 868 million in the last five business days of the month in order to execute the budget which is, in fact, impossible.
Of additional note is that the deficit in the expenditures part comes mainly from investment projects. Planned expenditures for investment projects significantly exceed real expenditures. More precisely, the planned expenditures for investment projects for the first nine months of this year were GEL 646 million whilst the actual expenditures of the first eight months amount to GEL 358 million (55.5% of the planned amount). We should also mention that there were shortfalls in the expenditures part of the budget in the two previous quarters as well. We may suppose that the full usage of the expenditures envisaged in the budget will not take place.
Graph 1. Completion of Investment Projects in 2014
Source: State Treasury
Conclusion
The budget execution is being successfully implemented in terms of the tax revenues part. It is less likely, however, that a 100% mobilisation of receipts and the full usage of the funds will occur. Of note is that budget execution implies the ‘full’ usage of both revenues and planned expenditures.
As of 23 September 2014, budget receipts equalled GEL 6,228 million which is 95.2% of the nine-month plan. From the perspective of the tax revenues, the execution is 100.5% but it is necessary to mobilise GEL 312 million in the last week of the month in order to fully execute budget receipts which, in all likelihood, will not happen.
From the perspective of expenditures, the eight-month completion is 82.3% whilst the actual number of payments falls behind the budget plan by GEL 868 million as of 23 September. The most notable shortfall is in the funding for investment projects. According to the eight-month summary, the actual expenditures on investment projects amount to 55.4% of the planned expenditure. As the expenditures part falls notably behind the budget plan in the first three quarters of the 2014 budget, this year’s budget will most certainly not be 100% executed.
FactCheck concludes that Nodar Khaduri’s statement: “The eight-month budget has been executed and there is a surplus. The ninth, 10th, 11th and 12th month budgets will be executed in the same way,” is MOSTLY FALSE.
Receipts include budget revenues (tax revenues, grants, other revenues) from the increase in financial and non-financial assets and liabilities.
