Given the depreciation of GEL and the decrease in economic growth forecasts, the Ministry of Finance of Georgia made a decision to review the 2015 state budget and lower its spending part. The Ministry of Finance of Georgia made an announcement about decreasing state spending at the end of February 2015 and presented the first version of the corrected budget in June 2015 (FactCheck wrote about this issue earlier as well:  Link 1, Link 2).

On the issue of the corrected state budget, the Chairman of the Centre for the Economic Development of Georgia, Roman Gotsiridze, stated that in reality the government did not decrease the budget but, rather, redistributed the money between various articles.

FactCheck

looked into the accuracy of the aforementioned statement.

According to the corrected version of the 2015 state budget, the state revenue and payment plan increased from GEL 9,875 million to GEL 9,900 million whilst the state budget deficit decreased from GEL 1,191 million to GEL 1,165 million.

Due to the decrease in the initial economic growth plan, the tax revenue plan of the 2015 state budget decreased by GEL 200 million; however, the overall revenues of the budget increased by GEL 25 million. The growth of revenues is mainly due to the drop in non-financial assets (privatisation) and the growth of the government debt. The revenues from privatisation increased by GEL 150 million (to GEL 235 million) as compared to the initial plan of the budget.

Table 1:

 Revenues of the 2015 State Budget

GEL Million	Initial Version of the Budget	Corrected Version of the Budget	Change
Revenues	9,875	9,900	25
Income	8,090	7,951	-139
Decrease in Non-Financial Assets	85	235	150
Decrease in Financial Assets	90	90	0
Increase of Liabilities	1,610	1,624	14

Source: Ministry of Finance of Georgia

Despite the fact that according to the corrected version of the 2015 state budget the state’s internal debt dropped from GEL 600 million to GEL 500 million, the country’s external debt increased which increases the overall amount of the debt by GEL 14 million as compared to the initial version of the budget. The growth of the external debt is the result of the depreciation of GEL. At the beginning of the year the state budget was planned using the 1.8 exchange rate (GEL to USD) whilst the corrected version is planned using the 2.3 exchange rate.

As for the spending part of the budget, the corrected budget provides for the growth of spending to GEL 8,017 million. The growth of spending is mainly due to grants (transfers) and the increased expenditure for the interest on the loans. Capital (infrastructural) spending decreased the most, by GEL 79 million.

Table 2:

 State Budget Spending

GEL Million	Initial Version of the Budget	Corrected Version of the Budget	Change
Spending	8,005	8,017	12
Remuneration	1,408	1,381	-27
Goods and Services	964	940	-24
Interest	364	377	13
Subsidies	248	240	-8
Grants	1,173	1,257	85
Social Security	2,688	2,688	0
Other Expenditures	1,161	1,133	-28

Source: Ministry of Finance of Georgia

As for the allocations for state structures, according to the corrected version of the budget, these amount to GEL 9,575 million. Even though the funding of certain ministries decreased as compared to the initial version of the budget, the vacated money was spent on financing other budgetary organisations.

Table 3:

 Allocations for Budgetary Organisations

GEL Million	Initial Version of the 2015 Budget	Corrected Version of the 2015 Budget	Change
Allocations for Budgetary Organisations	9,575	9,575	0
Ministry of Finance of Georgia	100	910	-9
Ministry of Economy and Sustainable Development of Georgia	120	85	-35
Ministry of Labour, Health and Social Affairs of Georgia	2,785	2,785	0
Ministry of Regional Development and Infrastructure of Georgia	1,000	945	-55
Ministry of Justice of Georgia	68.5	66	-2.5
Ministry of Foreign Affairs of Georgia	100	89.5	-10.5
Ministry of Defence of Georgia	640	667	27
Ministry of Internal Affairs of Georgia	638.7	591.6	-47.1
Ministry of Education and Science of Georgia	853.9	840.8	-13.1
Ministry of Energy of Georgia	125	114.3	-10.7
Ministry of Agriculture of Georgia	292.9	267	-25.9
Ministry of Environment and Natural Resources Protection of Georgia	39	36.5	-2.5

Source: Ministry of Finance of Georgia

According to the corrected version of the budget, the funding of the Ministry of Economy and Sustainable Development of Georgia (by GEL 35 million), Ministry of Internal Affairs of Georgia (by GEL 47 million), Ministry of Regional Development and Infrastructure of Georgia (by GEL 55 million) and the Ministry of Education and Science of Georgia (by GEL 13 million) is being decreased. However, the allocation to the Ministry of Labour, Health and Social Affairs of Georgia stays the same whilst the funding of the Ministry of Defence of Georgia increases by GEL 27 million. Transfers to local government increase by GEL 85 million.

On 17 July 2015, the Parliament of Georgia adopted the changes to the Law on the State Budget at the third hearing. The new budget will be closer to reality as the initial version of the budget was planned for the 1.8 GEL to USD exchange rate and a 5% economic growth. However, the country’s main financial document (state budget) has not been corrected in a way so that it can play a positive role in the stability of the exchange rate of GEL. For this, the spending part of the budget had to have been decreased significantly.

Conclusion

According to the corrected version of the budget, the revenues and payments plan increases by GEL 25 million. The increase of income is mainly due to the decrease in the state’s non-financial assets and the growth of the government debt.

According to the new version of the budget, the running costs of the state increase by GEL 11 million. Despite the fact that some of the ministries saw their budgets lowered due to the changes in the state budget, the overall amount of allocations for state structures does not change.

Hence, FactCheck concludes that Roman Gotsiridze’s statement is TRUE.