The Parliament of Georgia is in the process of discussing the 2016 budget. According to the current budget draft, old age pension will not increase in 2016. Even though the Georgian Dream’s election promise was to increase pension to GEL 220, this promise remains hitherto unfulfilled.
The United National Movement is speaking about the need to increase old age pension. The party’s statement reads: "It is possible to include a GEL 50 increase in pension in the 2016 budget. For this, it is necessary to curb bureaucracy, stop funding useless projects and move towards a targeted funding plan for special groups instead of the current universal funding system."
FactCheck tried to assess the Government of Georgia’s resources for increasing old age pension.
Until 2013, old age pension was in the margins of GEL 100-GEL 125 (GEL 110 for women aged 60-67 years and men aged 65-67 years and GEL 125 for those who were 67 years of age and older). In April 2013, old age pension for every pensioner became GEL 125 and then further increased to GEL 150 from September 2013. There was no increase in pension in 2014. In September 2015, old age pension increased by GEL 10 and amounted to GEL 160. During the last three years (from September 2012 to September 2015), prices on goods have increased by 9%. Therefore, taking the level of inflation into consideration, the real pension amount has not increased since 2013 (see FactCheck’s article on the topic).
The state budget for 2016 allocates GEL 1.840 billion for old age pension. As we have already mentioned, this budget draft does not envisage an increase in pension for the next year.
Graph 1: Amount of Money Allocated for Old Age Pension (GEL million)
As of September 2015, there are approximately 705,000 pensioners in Georgia. Statistics for the last years illustrate that the number of pensioners is constantly increasing. If we take the increase in the number of pensioners into consideration, the state will need at least an additional GEL 436 million to raise the pension by GEL 50 in 2016.
Are there sufficient resources in the state budget to increase old age pension by GEL 50? The revenues and expenditures of the state budget rise proportionally to the growth of the economy. In 2010-2012, Georgia’s economy grew by 7% on average whilst the average economic growth rate dropped to 3% in 2013-2015. Additionally, we have to take into account the fact that the country has a universal healthcare programme which comprises a large amount (GEL 570 million according to the 2016 state budget) of social expenses. Therefore, against the backdrop of all of the aforementioned, it will be difficult for the Government of Georgia to fulfil its promise and increase pension.
The Government of Georgia will be able to increase old age pension only in the case it decreases other expenditures (bureaucracy expenditures, premiums and bonus salaries) and directs the savings to pension. Additionally, the state can save a significant sum of money if universal programmes are replaced by targeted programmes.
According to the 2016 draft budget, current expenses will be increased by GEL 357 million in total. Expenses for social welfare will increase by GEL 280 million. They will increase by GEL 90 million for pension as a result of the growing number of pensioners and the GEL 10 increase in old age pension introduced in September 2015. The funding for universal healthcare is also increasing by GEL 100 million. In regard to so-called bureaucratic expenses, the amount of money for wages will be increased by GEL 57 million and expenditures for goods and services will rise by GEL 69 million. If the Government of Georgia refrains from increasing bureaucratic expenditures and makes the universal healthcare system a targeted one (which means that there will be no need to increase funding for universal healthcare), GEL 226 million will be liberated from the budget which can be used to increase old age pension. In this case, it will be possible to increase the amount of pension by GEL 25 from January 2016 and by GEL 50 from the second half of the next year. If the Government of Georgia decides to keep the universal healthcare programme and does not increase bureaucratic expenditures, it will be possible to increase pension by GEL 15 from January 2015.
One more option for increasing the amount of old age pension is by taking debt but this method should be excluded in the first place because funding social expenses with debt will lead the country to crisis and increase the level of inflation. Moreover, the real pension amount will not be increased.
On 5 November 2015, the Chair of the Healthcare and Social Issues Committee of the Parliament of Georgia, Dimitri Khundadze, stated: "In theory, it is possible to increase pension and, perhaps, pension will be increased. The Government of Georgia, together with the Parliament of Georgia, works hard to achieve a real growth of pension." However, the MP could not specify the increased pension amounts. Additionally, the budget line for old age pension still remains unaltered in the 2016 draft budget.
Conclusion
Old age pension was in the margins of GEL 110-GEL 125 until 2013. From September 2013, old age pension has been increased to GEL 150. There was no increase in pension in 2014 but the amount did grow by GEL 10 from September 2015. In the 2016 draft budget (current version), an increase in the amount of old age pension is not envisaged.
If the Government of Georgia refrains from increasing bureaucratic expenditures and makes the universal healthcare system a targeted one (in this case, there will be no need to increase healthcare expenditures), GEL 226 million will be liberated from the budget and so old age pension could be increased by GEL 25 from January 2016 and by GEL 50 from the second half of the next year.
Therefore, the idea that the Government of Georgia does have sufficient resources to increase the amount of old age pension is realistic. The fact concerning a possible increase in the amount of pension is confirmed by the Chair of the Healthcare and Social Issues Committee of the Parliament of Georgia himself who stated that there was a theoretical possibility for an increase in old age pension and that pension would perhaps be raised. However, the draft state budget, which the Government of Georgia has already returned to the Parliament of Georgia, does not envisage an increase in the amount of old age pension.
As of September 2015, there are approximately 705,000 pensioners in Georgia. Statistics for the last years illustrate that the number of pensioners is constantly increasing. If we take the increase in the number of pensioners into consideration, the state will need at least an additional GEL 436 million to raise the pension by GEL 50 in 2016.
Are there sufficient resources in the state budget to increase old age pension by GEL 50? The revenues and expenditures of the state budget rise proportionally to the growth of the economy. In 2010-2012, Georgia’s economy grew by 7% on average whilst the average economic growth rate dropped to 3% in 2013-2015. Additionally, we have to take into account the fact that the country has a universal healthcare programme which comprises a large amount (GEL 570 million according to the 2016 state budget) of social expenses. Therefore, against the backdrop of all of the aforementioned, it will be difficult for the Government of Georgia to fulfil its promise and increase pension.
The Government of Georgia will be able to increase old age pension only in the case it decreases other expenditures (bureaucracy expenditures, premiums and bonus salaries) and directs the savings to pension. Additionally, the state can save a significant sum of money if universal programmes are replaced by targeted programmes.
According to the 2016 draft budget, current expenses will be increased by GEL 357 million in total. Expenses for social welfare will increase by GEL 280 million. They will increase by GEL 90 million for pension as a result of the growing number of pensioners and the GEL 10 increase in old age pension introduced in September 2015. The funding for universal healthcare is also increasing by GEL 100 million. In regard to so-called bureaucratic expenses, the amount of money for wages will be increased by GEL 57 million and expenditures for goods and services will rise by GEL 69 million. If the Government of Georgia refrains from increasing bureaucratic expenditures and makes the universal healthcare system a targeted one (which means that there will be no need to increase funding for universal healthcare), GEL 226 million will be liberated from the budget which can be used to increase old age pension. In this case, it will be possible to increase the amount of pension by GEL 25 from January 2016 and by GEL 50 from the second half of the next year. If the Government of Georgia decides to keep the universal healthcare programme and does not increase bureaucratic expenditures, it will be possible to increase pension by GEL 15 from January 2015.
One more option for increasing the amount of old age pension is by taking debt but this method should be excluded in the first place because funding social expenses with debt will lead the country to crisis and increase the level of inflation. Moreover, the real pension amount will not be increased.
On 5 November 2015, the Chair of the Healthcare and Social Issues Committee of the Parliament of Georgia, Dimitri Khundadze, stated: "In theory, it is possible to increase pension and, perhaps, pension will be increased. The Government of Georgia, together with the Parliament of Georgia, works hard to achieve a real growth of pension." However, the MP could not specify the increased pension amounts. Additionally, the budget line for old age pension still remains unaltered in the 2016 draft budget.
Conclusion
Old age pension was in the margins of GEL 110-GEL 125 until 2013. From September 2013, old age pension has been increased to GEL 150. There was no increase in pension in 2014 but the amount did grow by GEL 10 from September 2015. In the 2016 draft budget (current version), an increase in the amount of old age pension is not envisaged.
If the Government of Georgia refrains from increasing bureaucratic expenditures and makes the universal healthcare system a targeted one (in this case, there will be no need to increase healthcare expenditures), GEL 226 million will be liberated from the budget and so old age pension could be increased by GEL 25 from January 2016 and by GEL 50 from the second half of the next year.
Therefore, the idea that the Government of Georgia does have sufficient resources to increase the amount of old age pension is realistic. The fact concerning a possible increase in the amount of pension is confirmed by the Chair of the Healthcare and Social Issues Committee of the Parliament of Georgia himself who stated that there was a theoretical possibility for an increase in old age pension and that pension would perhaps be raised. However, the draft state budget, which the Government of Georgia has already returned to the Parliament of Georgia, does not envisage an increase in the amount of old age pension.
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