On 5 November 2016, on air on Rustavi 2’s news broadcast, Roman Gotsiridze discussed the reasons behind the GEL depreciation and highlighted the Government of Georgia’s debt policy in this regard. Mr Gotsiridze stated that a decision was made to have the deficit growth of domestic debt capped at GEL 200 million but this limit has already been broken. He added that after taking additional debt from commercial banks and after issuing treasury bills, the Government of Georgia was again planning to auction GEL 50 million in treasury securities on 9 November which was a violation of the law.FactCheck
took interest in the accuracy of the statement.In his interview with FactCheck,
Roman Gotsiridze adjusted his statement and said that he was talking not about the deficit but about the growth in the domestic debt.
The Law of Georgia on the 2016 State Budget decreed that domestic debt should have been increased from GEL 738 million to GEL 938 million. This means that the growth of the domestic debt was capped at GEL 200 million.According to the information published on the Ministry of Finance’s website, the issuing of GEL 50 million in treasury bills on 9 November was indeed planned. As a result, treasury bills with a nominal value of GEL 33 million and a term of maturity of 12 months were sold at 7.05% of the weighted average rate at the 38th
Treasury Securities Auction.
The Ministry of Finance has already sold GEL 1,019 million in treasury bills throughout 2016 with three more auctions pending before the end of the year, based on the Ministry’s calendar, with a GEL 60 million total value of bills to be issued. However, the majority of this money is used to service previous debts.FactCheck
also verified that part of Roman Gotsiridze’s statement where he talks about the State Audit Office’s report. It was confirmed that the State Audit Office negatively assesses the fulfilment of the 2016 state budget. The Report of the State Audit Service emphasises several important factors in this regard; for example, it presumes that a large-scale spending of the unused funds at the end of the year increases the risk of inefficient spending and a waste of the funds. The report also points out the problems related to significant changes in already approved plans, cancelled or failed tenders and the quality of purchased goods and services. The State Audit Service underlines the necessity for more correct budget planning although it does not mention any specific violation of the law. It also assumes that some of the state organs might violate limits and thresholds but the report says nothing about any violations of the law.
On 4 November 2016, the Auditor General of the State Audit Office made a statement about the growth of domestic debt and called upon the Government of Georgia to take the country’s economic situation into consideration in the process of increasing the domestic debt. Lasha Tordia stated: “In this part, we always address the Parliament and Government of Georgia with recommendations to adopt and implement respective decisions in order to ensure the inviolability of limits and thresholds.”FactCheck
also took interest in how the growth of the domestic debt in the budget was fulfilled under the previous government. To this end, we compared information published on the website of the Legislative Herald of Georgia to the budget fulfilment reports (both interim and final) of 2009-2012 published on the website of the Ministry of Finance. The growth of domestic debt has not exceeded the limit determined at the beginning of the year in either of these cases.
It was determined in the state budget that Georgia’s domestic debt was planned to increase by GEL 200 million. Roman Gotsiridze’s statement that this limit was broken and that the state was planning to issue treasury bills beyond that limit was proven to be true. As of 9 November 2016, the growth of the country’s domestic debt was GEL 248 million and increased by a further GEL 33 million with an additional GEL 60 million in treasury bills scheduled to be issued before the end of the year.
In this regard, the Auditor General did make a statement which mentioned recommendations given to the Government of Georgia. Moreover, the State Audit Office published a report on the 2016 state budget fulfilment process which emphasised debt policy and deficit spending as well.
In regard to a violation of the law concerning the budget deficit, the law will be violated only in the case when the growth of the domestic debt in the state budget exceeds GEL 200 million by the end of the year. In order to avoid this, the Government of Georgia has either to pay back the amount which it borrowed over the limit or amend the Law of Georgia on the 2016 State Budget.FactCheck concludes that Roman Gotsiridze’s statement is HALF TRUE.