Irakli Kadagishvili: “Grants constitute less than 0.5% of the budget.”
Verdict: FactCheck leaves Irakli Kadagishvili’s statement WITHOUT A VERDICT.
Foreign grants constituted an average of 2.4% of the total budget revenues from 2013 to 2023. However, reliance on grants began to decline in 2020, decreasing to 0.8% in 2023 and further projected to drop to 0.6%, as per the 2024 budget.
State budget revenues are projected to reach GEL 24.6 billion in 2024. The institution with the highest expenditure is the Ministry of Health with GEL 7.8 billion allocated, GEL 2.5 million of which is from foreign grants, constituting less than 0.1% of the Ministry’s financing.
Whilst the MP’s statement is statistically accurate, Irakli Kadagishvili overlooked the potential consequences of deteriorating relations with the West. Grants are just one reflection of partnership and thus, halting grants is another confirmation of worsened relations.
Georgia benefits from various aspects of its relations with the West, including low-interest loans, direct foreign investment, educational exchange programmes, visa-free travel (for terms of 90 and 180 days) and free trade with the European Union, and unwavering support in not recognising occupied territories. Therefore, even a slight decline in these areas could lead to significantly negative outcomes.
Despite statistical accuracy, omitting the potential accompanying outcomes is an attempt to embellish the reality. Furthermore, the exact extent of the revision of existing strategic partnerships is unknown, making it impossible to accurately predict how damaging it will be for the country. Considering all of the aforementioned factors, FactCheck leaves Irakli Kadagishvili’s statement WITHOUT A VERDICT.
Analysis
MP of the Georgian Dream political party, Irakli Kadagishvili, commented on the halt of foreign assistance, stating: “Our state budget totals GEL 19 billion, with grants making up less than half a percent of this amount. The budget of the Ministry of Health is GEL 8 billion. Referring to the GEL 2 million in grants, when taking the Lugar Centre into account, is not an accurate approach to the topic.”
Foreign grants and loans constituted an average of 16% of the state budget from 2013 to 2023. The state budget received a total of GEL 23 billion in loans and GEL 3.4 billion in grants over these 11 years. Notably, over GEL 2 billion is projected to be received according to the 2024 projections.
The aforementioned assistance was not always uniform. The share of grants and loans exceeded 30% in the state budget revenues during the pandemic years of 2020 and 2021, decreasing to 13% in 2022 and 9% in 2023. The share is projected to decline further to 8% according to the 2024 budget. Notably, the average share of grants and loans was 13% from 2013 to 2019.
Graph 1: Foreign Grants and Loans in the State Budget (GEL Million)
Source: Ministry of Finance of Georgia
Loans constitute 84% of the total grants and loans on average with the figure rising to 90% in recent years. The remaining smaller share accounts for grants.
The share of foreign grants in total state budget revenues averaged 2.4% from 2013 to 2023. This variable peaked at 3.2% in 2019 and has been gradually decreasing since then. It fell below the 2% mark in 2021 and dropped below 1% in 2023. Grants are projected to contribute 0.6% to the state budget in 2024.
Graph 2: Volume and Share of Foreign Grants in State Budget Revenues
Source: Ministry of Finance of Georgia
The funding in 2024 budget for the Ministry of Labour, Health and Social Defence of Georgia totals GEL 7.8 billion with GEL 40 million representing loans and GEL 2.5 million – grants.
The construction of the Richard Lugar Centre for Public Health Research, known as the Lugar Laboratory, started in 2004 with funding from the United States and the facility opened in 2013. The Lugar Laboratory, including its equipment, is in the property of the Georgian government and the full funding for the Lugar Centre and Laboratory has been provided by the Georgian government since 2018.
Whilst the MP’s statement is statistically accurate, there is another factor to consider – halting foreign grants signifies a decline of partnership. These strategic partnerships are valued higher than the annual GEL 150 million.
The United States funded the construction of the Lugar Laboratory and subsequent research with a total of USD 350 million. Independently finding qualified staff and meeting all necessary construction standards would have posed additional challenges, even if the entire aforementioned amount had been financed from the Georgian budget. Additionally, Russia actively opposed the construction of the laboratory which would have undermined the likelihood its completion altogether.
Russia has claimed that biological weapons were being produced at the Lugar Laboratory for years. Certain accusations without evidence have surfaced from numerous sources, including officials, controlled media, bloggers and experts, alleging that various viruses were spread from the Lugar Laboratory.
Whilst the Georgian side did not object to the inclusion of Russian experts in the multilateral monitoring process, Russia requested exclusive access, something to which Tbilisi did not agree.
The Lugar laboratory is just one part of the US-Georgia cooperation. Tbilisi has received USD 6 billion from Washington in humanitarian, economic and military aid over the past 32 years. Notably, the volume of assistance peaked after 2008.
Although the World Bank and the International Monetary Fund are international organisations, the US holds a decisive influence over them. Moreover, the United States is the primary supporter of the non-recognition policy.
The Western world, broadly comprised of the European Union, Great Britain, Norway, the United States and Canada, often acts in a coordinated manner. The policies of South Korea, Japan, Singapore, Australia and New Zealand align with the Western world. Whilst statements from Washington do not represent an obligation for the remaining aforementioned countries, the United States holds a leading position in the Western world, suggesting that deteriorating relations with it could lead to severe outcomes.
Despite the share of grants amounting to less than 1%, the share of loans dropped below the double-digit percentage mark only in 2023. If this tendency persists (likelihood of complete elimination is minimal at this stage), the government will have to either abandon numerous projects or seek other, more expensive resources.
The United States halted funding for the small nation of Nauru due to a legislative change that countries recognising the so-called independence of the occupied territories of Georgia would no longer receive US funding in 2019. Although Belarusian President Lukashenko initially considered recognising the independence of Abkhazia and the Tskhinvali region, he ultimately refrained due to the threats of sanctions. The occupied territories of Georgia are recognised by four other states apart from Russia: Venezuela, Nicaragua, Syria and Nauru. However, the number of countries aligning with pro-Russian policies has significantly increased worldwide. It is unlikely that the occupied territories will become subjects of international law amidst the deteriorating Western support; however, the risk of more states joining Nicaragua and Venezuela in recognition will rise.
Georgia received candidate status for the European Union in December 2023 despite some disagreements. Whilst issues remain in certain aspects, the re-introduction of the so-called “Russian law,” its adoption in three readings and the overcoming of the Presidential veto substantially escalated the disagreement. Furthermore, uninvestigated attacks on opposition leaders and other opposing individuals followed parallel the review of the law. The United States, the European Union, the OSCE ODIHR and the Venice Commission condemned the Russian law.
Sanctions were announced soon after. The United States imposed visa restrictions on Georgian high-ranking officials. In addition to the US, the European Union ceased part of its aid AND France also announced a suspension of its allocated aid.
The aforementioned disagreements have not resulted in significant problems for the economy so far. A 9.5% economic growth was observed in the second quarter. However, it should also be noted that the National Bank of Georgia had to sell USD 170 million in foreign exchange auctions to stabilise the exchange rate in May and June, primarily to reduce panic.
Despite statistical accuracy, omitting the potential accompanying outcomes is an attempt to embellish the reality. Furthermore, the exact extent of the revision of existing strategic partnerships is unknown, making it impossible to accurately predict how damaging it will be for the country. Considering all of the aforementioned factors, FactCheck leaves Irakli Kadagishvili’s statement WITHOUT A VERDICT.
