On 21 October, whilst speaking about the 2014 state budget’s three-quarter completion rate, the Minister of Finance of Georgia, Nodar Khaduri, noted that the situation concerning the budget’s completion had improved. He also added that the implementation process of infrastructural projects decelerated in the first half of the year but accelerated to a great extent in the second half.

FactCheck

took interest in the Minister’s statement and verified its accuracy.

The comparison of the planned and actual rates of the first six and nine months of 2014 will allow us to measure the correctness of the statement made by Mr Khaduri.

The six-month budget of 2014 was completed by 96.9% in the receipts budget line and by 90.8% in the taxes budget line. A low withdrawal rate of grants (completed by 47%) and foreign funding (completed by 53%) can explain a lagging behind in the receipts plan.

Completion of the expenditures by 90.8% was caused by the 78.6% completion rate of the infrastructural projects plan. Therefore, the Minister is correct when stating that the implementation of infrastructural projects decelerated. None of the other budget lines was completed by 100% (i.e. the products and service budget line – completed by 86%, the transfers budget line – 93% and the other expenditures budget line – 77%).

The infrastructural project plan was completed by 128% in the third quarter with the actual rate reaching GEL 158 million instead of the planned GEL 132 million. Overall, the expenditures plan was completed by 101.9%. Attracting grants worth GEL 23.6 million was planned for the third quarter with GEL 79 million having been attracted which surpassed the plan by 3.3 times. The tax revenue plan was completed by 101.7%. The comparison of the actual and planned gross receipts shows that the budget received extra funds worth GEL 159 million whilst the planned amount was GEL 2,392 million. Therefore, the plan was completed by 106%.

As the data above show, the planned budgetary rate is being completed in the third quarter but it is interesting to see to what extent the nine-month budget was completed and what the situation is in this regard.

As of September 2014, the infrastructural projects funding plan was completed by 72%, lagging behind the planned expenditures by GEL 158 million. Overall, the expenditures were completed by 91.6% and GEL 565 million less than the planned amount were spent. Besides the infrastructural projects, a low completion rate has been recorded in the following budget lines: products and service – 89.6%, growth of financial assets – 75.2% and other expenditures (with the major share of infrastructural project expenditures) – 81.4%.

As for the receipts, there is a significant progress in the nine-month completion rate as compared to the six-month completion. The completion rate has increased from 96.9% to 99.5% which is mainly due to the completion of the tax revenue nine-month plan by 102.7%. Due to the notable increase in attracting grants, the nine-month plan was completed by 101.9%. The other revenues budget line is significantly lagging behind the plan (completed by 71.6% which is a GEL 78 million lag). The lag in the given line is due to the 27% completion rate of the planned revenues from the private property budget line and the 77% completion rate of the planned revenue from the penalties and fines budget line. The foreign liabilities growth budget line has increased by 82.6% (the lag is GEL 110 million). It includes borrowing from abroad and is tied to infrastructural projects. As the infrastructural projects are being implemented at a slower pace, the government is not able to fully withdraw the assigned foreign funding.

Table 1.

Nine-Month Completion of the 2014 State Budget

GEL million	Nine-Month Plan	Nine-Month Completion	Completion Rate (with regard to the plan)
Receipts	6,538	6,505	99.5%
Revenues	5,308	5,363	101%
Taxes	4,909	5,039	102.7%
Grants	123.7	126.1	101.9%
Other Revenues	275.5	197.2	71.6%
Decrease in Non-Financial Assets	61.5	66	107.3%
Decrease in Financial Assets	49.1	52.8	107.6%
Increase in Liabilities	1,119	1,023	91.4%
Increase in Local Liabilities	490	504	102.8%
Increase in Foreign Liabilities	629	519	82.6%
Expenditures	6,748	6,183	91.6%
Salaries	978	946	96.7%
Products and Service	685	614	89.6%
Interest	194	179	92.2%
Subsides and Grants	949	905	95.4%
Social Security	1,883	1,867	99.2%
Other Expenditures	858	698	81.4%
Increase in Non-Financial Assets	559	401	71.8%
Increase in Financial Assets	193	145	75.2%
Decrease in Liabilities	448	427	95.4%

Source: State Treasury

Conclusion

After verifying the factual data, we can conclude that the completion rate of the infrastructural projects has improved in the second half of the year (in the third quarter) but the nine-month completion rate still lags behind the plan by 28.2%.

The government only attracted 47% of the planned amount of grants (GEL 47 million) in the first half of 2014. The condition has improved in the second half of the year: the state attracted grants amounting to GEL 79 million instead of the planned GEL 23 million. Therefore, it is not valid from Mr Khaduri to speak about an “extreme acceleration” of the attraction rate of grants. Moreover, the tax revenue plan was completed by 102.7%.

Despite the increased budget completion rate in the third quarter, the lag in the expenditures budget line is still significant and amounts to GEL 565 million which is an important amount and withdrawing it before the end of the year is less likely which means that the budget will not be completed. The Minister does not consider this gap important but taking into account that the budget is not being completed for already two years in a row and the shortage is significant, this indicates that a problem exists. The government cannot fully use the existing resources and all the more so in such an important direction as infrastructure development.

We conclude that Nodar Khaduri’s statement: “The implementation of infrastructural projects decelerated in the first half of the year. This process accelerated to a great extent in the second half of the year (including the receipt of grants). I do not see anything alarming in it (budget execution). The tax plan has been completed by nearly 102%,” is HALF TRUE.