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During his speech at the Parliament of Georgia, the Minister of Finance of Georgia, Dimitri Kumsishvili, stated: “The 2017 state budget fully reflects the priorities which we had during the pre-election period and which brought us victory in the elections.”

FactCheck

verified the accuracy of Mr Kumsishvili’s statement.

The pre-election programme of the Georgian Dream consists of four parts (democratic development, economic development, social development and external security and defence). Each of these parts reviews the work done in the given field during the party’s previous four years of office and presents the promises for the upcoming four years. Given the considerable length of the document, FactCheck

has looked into only the most spoken-about and relevant promises and their compatibility to the 2017 state budget.

Administrative Spending

In its 2016 pre-election programme the Georgian Dream announced a constant process of cost-optimization for the upcoming four years of its office. According to the programme, the growth of administrative spending must be reduced and the saved money allocated to the priority areas.

During its first year of office the Georgian Dream reduced administrative spending by 3%; however, the years from 2014 to 2016 saw a stable 7% annual growth of administrative spending. For 2017, the growth rate, as compared to the previous years, reduces and becomes 2%. This is in line with the pre-election promises of the party.

Table 1:

 Administrative Spending from 2013 to 2017 (GEL Million)

Year 2013 2014 2015 2016 2017
Remuneration 1,181 1,296 1,376 1,443 1,393
Goods and Services 855 875 941 1,037 1,144
Administrative Expenditure 2,036 2,171 2,317 2,480 2,537
Growth (%) -3 7 7 7 2
Source: Ministry of Finance of Georgia

State Debt

The pre-election programme of the Georgian Dream talks about the state debt with regard to GDP of the country; however, it does not provide a forecast regarding the changes in the amount of debts, only saying that the state debt with regard to the GDP will be maintained on a level which will ensure Georgia’s stable international image and credit rating.

Georgia’s state debt with regard to GDP has been characterized with the trend of increase since 2013, the only exception being the 44.2% forecast rate of 2017 which is slightly lower than the rate of the previous year (44.2%). However, the aforementioned difference is due to the growth of the Georgian economy and not because the government is borrowing less. In 2017, the Government of Georgia plans to take an additional GEL 1,267 million debt whilst in 2016 the amount of debt in absolute terms increased by GEL 1,012 million.

   Chart 1:

 State Debt of Georgia with Regard to GDP

image001 Source: Ministry of Finance of Georgia

As of 31 January 2017, the state debt of Georgia with regard to GDP is 46%, which is already higher than the forecast rate of the year. The ratio of debt to GDP relies heavily upon the exchange rate of GEL. If the exchange rate is not strengthened, the ratio of debt cannot be reduced to 44%.

It should be noted that in 2015-2016 two international organizations, Fitch and Moody’s downgraded Georgia’s credit rating by one point which reflects reduced solvency. One of the state reasons of downgrading the credit rating was the increased state debt of Georgia (See FactCheck’s article

on this issue).

Infrastructure

According to the pre-election programme, in case of being elected for the second term in office, the Georgia dream would spend USD 3.5 billion on infrastructural projects.

According to the explanatory note of the 2017 state budget, the Government of Georgia announces that it will spend GEL 10 billion on major infrastructural projects in upcoming four years (which is about GEL 300 million more than the originally promised USD 3.5 billion) which is 2.5 times more than the amount spent on infrastructure from 2013 to 2016.

Table 2:

 The Largest Budget Infrastructural Projects from 2017 to 2020, GEL Million

1 Sewer System Sustainable Management Project  (SIDA) 1,294
2 Regional Development Project II (Imereti) (WB) 1,227
3 Intra-State and Local Roads Project No. 2 (WB) 1,015
4 Regional Development Project I (Kakheti) (WB) 838
5 Kutaisi Waste Integrated Management Project (EU, KfW) 694
Source: Ministry of Finance of Georgia

It should be noted that during the first term of the Georgian Dream the infrastructural project were not being fully implemented and the forecast amounts to be spend on major infrastructural projects were higher than the actually spent ones. Given this trend, certain doubts arise about the implementation of the 2.5 times bigger infrastructural budget.

The pre-election programme also talks about creating constant water supply to 360,000 people in upcoming four years which means a 24 hour water supply to about 120,000 households. According to the information of Georgian Water and Power, this forecast amount is 3.5 times bigger than the number of supplied households in the past four years (34,000).

The 2017 state budget has allocated appropriate funds for the infrastructure; however, only time can show whether the promise will actually be fulfilled.

Healthcare

According to the pre-election programme, the Universal Healthcare Programme will be maintained; however, it will be funded in a way that will facilitate the better development of the already existing, basic service package. Additional services will then be supplied by the private insurance companies.

FactCheck has already written

about the inefficiency of the Universal Healthcare Programme in its current form before. The government is struggling with the financial monitoring of the Programme and surpasses the planned budget every year, having to look for additional funding from the state budget. The Universal Healthcare Programme cost GEL 300 million instead of GEL 200 million in 2014, GEL 570 million instead of GEL 470 million in 2015 and GEL 681 million instead of GEL 570 million in 2016.

In order to optimize the expenses the Universal Healthcare Programme has been corrected. The Programme will no longer cover those who are using the private insurance policies. This change became known only after the elections were concluded. The pre-election programme said that “supplication and provision of additional services will fall to private insurance companies.” So far, this promise is not being fulfilled.

Education (Wages of the Teachers)

The pre-election programme of the Georgian Dream announced that the wages of the teachers would be increased and would reach GEL 800 from 1 January 2017. This promise seemed to claim that all teachers would receive GEL 800 monthly wage from 1 January 2017, which is certainly not true.

According to the explanatory note of the 2017 state budget, the funding of the Ministry of Education and Science of Georgia increased by GEL 144.8 million. The funding of the secondary education amounted to GEL 655.9 million which also envisages the growth of wages for certain categories of teachers.

The 58,535 teachers employed in the public schools fall into four main categories (practitioner, senior, leading and mentor). About 74% of all teachers are practitioners whilst there are no teachers with the status of mentor so far. As it turned out, the wages of senior and leading teachers will be increased from 1 January 2017 and reach GEL 800 only in the case if these teachers are working full-time. There are only 14% of teachers who meet this demand at the moment.

Hence, the pre-election promise of the Georgian Dream about increasing the wages of the teachers is being fulfilled for a small group of teachers only.

Providing Accommodation to the IDPs

According to the pre-election programme the government will continue providing the IDPs with accommodation effectively. Building blocks will be built or rehabilitated in Zugdidi, Kutaisi, Gori, Tskaltubo, Mtskheta and Tbilisi which will mean providing accommodation for a total of 11,966 IDPs in the period from 2017 to 2020. The programme also says that in case of re-election, the government will give agricultural land to the IDPs living in the villages.

According to the Ministry of Internally Displaced Persons from the Occupied Territories, Accommodation and Refugees of Georgia, more than 2,000 IDPs will receive accommodation in 2017; however, the Ministry is not naming a specific number. Taking the statistics of the previous years into account, providing 2,000 IDPs with accommodation annually is an average indicator. A total of 1,772 IDPs were given accommodation in 2013, 1,493 in 2014, 2,739 in 2015 and 2,141 in 2016. If the previous trend keeps up, Georgian Dream’s promise about providing accommodation to 11,966 IDPs will not be fulfilled. In order to deliver upon the promise, the Government of Georgia will have to reach an annual average of 3,000 IDPs provided with accommodation. Whether fulfilling this promise is actually possible will become clear in the upcoming years.

Things that Were Not Said Prior to the Elections

The 2017 state budget featured a number of important changes which were not present in the pre-election programme or promises of the Georgian Dream. First of all this is a significant increase in the excise tax on car fuel and oil as well as automobiles and cigarettes which has already caused a 40% increase in the prices of cigarettes and fuel. Imposing a property tax on cars and increasing the tax on gaming businesses have also made the list.

Conclusion The 2017 state budget is not in accordance with the main promises featured in the pre-election programme of the Georgian Dream, as outlined by FactCheck.

In addition, taking the statistics of the previous years into account, there are certain doubts about the possibility of fulfilling some of the promises and forecast. In a number of cases, the Georgian Dream avoids making specific forecasts altogether (the cases of state debt and providing the IDPs with accommodation). Hence, when talking about these issues, it is not easy to determine whether they are actually envisaged in the budget. The promise about increasing the wages of the teachers was also vague and, to a certain extent, misleading as well. Despite this, some of the promises in the pre-election programme have been planned in the budget as well (for example the infrastructural projects).

It is important to note that the 2017 state budget revenues will increase noticeably due to the growth of the excise tax, which was not announced prior to the elections. Same can be said about some other points of the so-called Ten-Point Plan of the Government of Georgia.

FactCheck concludes that Dimitri Kumsishvili’s statement is MOSTLY FALSE.

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