Khatuna Samnidze: “Foreign credits and grants accounted for 46% of the budget amid the pandemic.”

Resume: According to the revised 2020 state budget, total revenues amounted to GEL 18.042 billion. Of that amount, GEL 487 million was grants, GEL 7.290 billion was credit and GEL 5.724 billion was a foreign credit. In total, foreign credits and grants together reached GEL 5.724 billion which accounts for 31.7% of total budget revenues. FactCheck concludes that Khatuna Samnidze’s statement is MOSTLY TRUE.

Analysis

On 28 February 2023, on air on TV Pirveli’s talk show Reaktsia, MP Khatuna Samnidze, when speaking about the so-called draft law on foreign agents, noted that the government itself does not refuse to accept funding from abroad. In particular, Ms Samnidze stated (from 22:17): “The Parliament would not be able to work if there had not been support from our partners and the budget would also not be in good order. The Georgian Dream would not be able to issue salaries and they know it. For instance, amid the pandemic, 26.5% of our budget and 46% in another case was foreign money, loans and grants.”

Georgia has been a beneficiary of international budgetary aid in the form of credits and grants since the 1990s. According to the World Bank, Georgia’s government debt to the GDP ratio was above 61% as early as in 1995 which dropped to 46% in 1997 and topped at 60% again in 2001. This practice of taking foreign loans continued under the United National Movement’s rule as well but because of the high economic growth rate, government debt to the GDP ratio contracted to 29% by 2012 (in 2007 it was 19%). The Georgian Dream also continued to take loans and the debt to the GDP ratio exceeded 45% prior to the pandemic whilst taking massive foreign loans and the record depreciation of GEL caused it to skyrocket above 65% in light of the 6.8% decline of the Georgian economy. The statistics include the total government debt of which 70% is foreign debt.

The share of funding provided by donors is very high in large infrastructural projects such as the high-speed highway and the water supply network. According to the 2023 budget, there are plans to spend GEL 1.242 billion for the high-speech highway of which GEL 898 million (over 72%) of this amount is a loan.

As a result of the pandemic, 2020 and part of 2021 were exceptions when loans were also used to finance social expenditures. In total, GEL 30.8 billion was attracted to the budget under the Georgian Dream’s rule in 2013-2023 (in view of the 2023 plan). Of that amount, GEL 3.9 billion was foreign grants, GEL 5.4 billion was domestic loans and GEL 21.5 billion was foreign loans.

In 2013-2023, grants and credits accounted for 22.7% of the budget with 16.6% being grants and foreign credits.

Under the Georgian Dream’s rule, the government borrowed the most – both in absolute and relative terms – in 2020 and exceeded the total debts taken in the previous four years together.

Table 1: Volume of Credits and Grants in the State Budget

Source: Ministry of Finance of Georgia

The GEL 5.7 billion (GEL 460 million credit and GEL 5.3 billion loan) international aid accounted for 31.7% of 2020’s budget revenues. This is a rather high figure but well below the 46% named by Khatuna Samnidze. The MP made two inaccuracies in the statement: 1) she added domestic credits to foreign credits when making her calculations and 2) she took her figure from preliminary plan and not from the revised data. After the first revision since the outbreak of the pandemic, 2020 budget revenues were planned at GEL 18.240 billion (GEL 378 million as compared to the factual figure), grants at GEL 558 million (GEL 98 million more) and credits worth GEL 8.038 billion (GEL 748 million more), including foreign credits in the amount of GEL 6.188 billion (GEL 924 million more) and domestic credits in the amount of GEL 1.850 billion (GEL 176 million less). If the plan had been executed, the total share of loans and credits would have reached 46.7% of budget revenues.

Although the statistical indicator provided by Khatuna Samnidze is nearly 15 percentage points different from the actual figure, 31.7% is still a very high number. The context also needs to be taken into account. Since 1994, there have been only two cases when Georgia experienced an economic decline, in 2009 and 2020. In 2009, the share of grants and foreign loans accounted for 20.3% of budget revenues. Of additional note is that after Russia’s military intervention and in light of the world economic crisis, Georgia’s economy contracted by 3.7% in 2009 whilst it dropped by 6.8% in 2020.

In 2020, the total amount of money from tax collection reduced by GEL 300 million and dropped to GEL 9.365 billion. Therefore, the government would have faced extreme difficulties to implement programs such as the medical treatment of people infected with COVID-19 as well as the disbursement compensations for people who were laid-off because of lockdown and provide utility bill reliefs without foreign credits.

Given the importance of the factual circumstances, despite some inaccuracies with the figures, Khatuna Samnidze’s statement can be concluded as MOSTLY TRUE.

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