The government and the opposition, as well as the majority of economic experts, have different opinions regarding the execution of the 2014 budget. According to the Minister of Finance of Georgia, Nodar Khaduri, the 2014 budget has been executed. Moreover, Mr Khaduri stated that 2014 was the only year in which the budget was executed. On the other hand, leader of the United National Movement, Zurab Japaridze, stated that the 2014 budget was executed only on paper and that projects planned for this year have not been fully implemented.

FactCheck took interest in the budget execution issue and verified the aforementioned statements.

The state budget is a plan of the estimated receipts and expenditures of the state for a year. The execution of the state budget means that receipts received and payments made are at the planned level by the end of the year.

According to the data of the State Treasury, receipts amounted to GEL 9,125 million in the 2014 budget, constituting 100.2% of the plan. Tax revenues equalled GEL 6,847 million, constituting more than the planned amount (100.3%). As for the payments plan, its completion equalled GEL 8,977 million or 98.9% of the plan.

In 2014, GEL 1,636 million was planned to be borrowed of which GEL 600 million would be domestic and GEL 1,036 million would be foreign. Table 1 shows that the domestic debt was higher throughout the year than planned whereas the increased rate of foreign debt comprised half of the planned amount. Foreign debt worth GEL 478 million were transferred in the fourth quarter of 2014. According to the data of the State Treasury, the largest part of the amount, GEL 384 million, was transferred in December 2014. It should be noted that the convergence of the foreign debt to the planned amount in December 2014 was promoted by the devaluation of GEL as well. The budget had been planned for a 1.71 exchange rate of GEL whereas the average exchange rate of GEL to USD in December was 1.88. Subsequently, of the GEL 384 million transferred in December, GEL 40 million of it was due to GEL devaluation.

Table 1:Domestic and Foreign Debt Growth throughout 2014 (GEL million)

Source:Ministry of Finance of Georgia

Foreign debt includes the preferential loans issued by international donors that are mostly used for infrastructural projects of public importance. Therefore, a shortfall in the foreign debt line means that planned infrastructural projects are not being fully implemented.

Looking at investment expenditures, it turns out that investment projects were financed unevenly throughout 2014. More precisely, there was a significant shortfall at the beginning of the year and high spending at the end of the year. GEL 463 million were spent on investment projects over nine months (71.8% of the plan) whereas GEL 370 million were transferred to fund investment projects in the last three months of the year.

Table 2:Execution of the 2014 Budget in Payment Lines (GEL million)

Source:Ministry of Finance of Georgia

FactCheckverified the execution of investment projects in 2010-2012. According to the data of the State Treasury, investment projects were funded as planned in this period. The second half of 2012 was an exception, however, when the investment projects plan was completed by 85%.

Even though the annual plan of the receipts and payments was executed with a high percentage, the 2014 budget is not an exception with its high execution rate as Mr Khaduri states. Budget plans have been even over-performed with respect to the initial plan in previous years.

Table 3:Budget Execution with Respect to Initial Plan in 2008-2013

Source:Ministry of Finance of Georgia

It should be noted that the quarterly budget plans of 2014 were unevenly executed which resulted in a deficit spending at the end of the year. More precisely, the budget deficit was GEL 605 million in the fourth quarter. In December, the budgetary deficit amounted to GEL 269 million which was eventually one of the reasons for the devaluation of GEL.

According to the quarterly budget execution, GEL 600-700 million were being spent on average per month whilst GEL 1,253 million were spent in the month of December. From this amount, GEL 489 million were transferred in the last five working days of the month. It is logical that despite the transfer, it was impossible to implement the planned projects in a period of several days. The budget was formally executed and in reality the projects that should have been implemented before the end of 2014 were shifted to 2015.

Conclusion

The 2014 state budget was executed by 100.2% in the receipts line and by 98.9% in the payments line. As for the budget completion in 2004-2012, thanks to the economic growth, budgetary receipts were increasing with such a rate that the execution by the end of the year was significantly exceeding the budget plan as approved at the beginning of the year. Therefore, previous years can be considered more successful in terms of budget execution. The disproportion existing in the quarterly completion of investment expenditures and foreign debt gives us sufficient grounds to say that the investment projects planned in 2014 were not fully implemented.

Therefore, FactCheck concludes that Mr Khaduri’s statement: “2014 was an exceptional year in which the budget was executed,” is MOSTLY FALSE whereas Mr Japaridze’s statement is MOSTLY TRUE.