Roman Gotsiridze: “The Prime Minister’s reserve fund accumulated GEL 1.1 billion with planned expenses totalling GEL 500 million and an over-expenditure of GEL 600 million.”

Verdict: FactCheck concludes that Roman Gotsiridze’s statement is TRUE.

The Prime Minister’s (government’s) reserve fund, a component of the state budget, is utilised to cover costs that were unforeseen or unbudgeted.
The budget plan for the reserve fund of the government of Georgia amounted to GEL 630 million between 2013 and 2023. However, the fund’s total volume exceeded GEL 1 billion, as per the government’s normative acts, resulting in a deviation of GEL 373 million from the original plan. Whilst Roman Gotsiridze has inaccurately cited some of the data, the context that the fund spent significantly more than planned remains accurate.
Moreover, it is also true that the reserve fund should cover expenses that cannot be determined and planned in advance, considering its purpose. However, practice shows that the fund often finances activities that could have been included in the budget. For instance, the 2024 government’s reserve fund financed events commemorating 26 May, activities organised within the framework of Europe Days, municipal transfers and even parliamentary elections. Therefore, in reality, the fund’s resources are not solely used for unpredictable expenses.
Considering the crucial context, despite the inaccuracies in the presented data, FactCheck concludes that Roman Gotsiridze’s statement is TRUE.

Analysis

During his appearance on the TV Formula show Droeba, alongside other topics of discussion, Roman Gotsiridze commented on the government’s reserve fund, stating: “The government manages the Prime Minister’s reserve fund which consists of resources controlled unilaterally by the Prime Minister without requiring confirmation from Parliament. The reserve fund was typically planned at GEL 50-60 million with deviations resulting in over-expenditure. Its intended purpose is to cover unexpected costs, such as droughts, heavy snowfall and natural disasters – expenses that arise unpredictably. In reality, GEL 1.1 billion was accumulated in this fund during Georgian Dream’s governance with planned expenses totalling GEL 500 million and an over-expenditure of GEL 600 million.”

FactCheck decided to investigate the structure of the government’s reserve fund, analysing the total resources accumulated during the Georgian Dream’s governance.

The reserve fund is a component of the state budget with the President or the Prime Minister using the accumulated resources to cover unforeseen expenses.

The reserve funds of the President of Georgia and the government of Georgia are established in the state budget according to the Budgetary Code of Georgia. The combined total of these funds is not to exceed 1% of the total allotments outlined in the annual budget. The same Code also allows for an increase in the volume of these funds with each fund’s growth not exceeding 20% of its confirmed amount.

Resources from the reserve funds of the President and the government are used to finance expenditures not included in the state budget. The directions of expenditures from these reserve funds are defined by the President of Georgia and the government of Georgia, respectively, in accordance with the amounts specified in the adjusted budget (Article 28, Paragraph 1).

It should be noted that the President’s reserve fund was abolished in 2019 and only the government’s reserve fund remains.

The planned financing for the government’s reserve fund has varied between GEL 50-60 million during the Georgian Dream’s governance (specifically, 2013-2023) according to the Performance Reports of the State Budget of Georgia. The exception was 2015 when the planned reserve fund budget amounted to GEL 85 million. After that, the initial plan was adjusted through the government’s normative acts each year, substantially increasing the fund’s financing. The only years without adjustments were 2022 and 2023 (the full data for 2024 and the current year are unavailable). However, the fund’s planned amount for 2023 was GEL 100 million.

Refer to Table 1 to see how the funding for the government’s reserve fund has changed throughout the years.

Table 1: Planned Budget for the Reserve Fund of the Government, Resources Outlined in Normative Acts (GEL Million)

Source: Ministry of Finance, State Budget Performance Reports

The budget reports show that there is a significant difference between the budget plan for the government’s reserve fund and the final amount increased by normative acts. Furthermore, it is noteworthy that the specified ceiling for the growth in the volume of the reserve fund was violated on many occasions – the increased amount exceeded the initial amount by much more than the 20% limit. Overspending is particularly evident in the early years of the Georgian Dream’s governance – between 2013 and 2017 – when the rise in the volume of the fund exceeded 100%. The most noticeable year was 2016 when the volume of the government’s reserve fund increased by 256% as compared to the initial plan.

Roman Gotsiridze highlights this very point in his statement. Whilst he cited incorrect data regarding the planned budget figures, his claim that the fund’s expenses during the reporting period exceeded GEL 1 billion was accurate.

It should also be noted that uncontrolled spending of reserve funds was a problem under the previous government. However, the situation has not improved under the current government as an observation of the fund’s spending suggests otherwise.

The reserve fund is intended to finance expenses that are not foreseen in the budget, as mentioned above (such as natural disasters or events that cannot be planned in advance). However, when examining the fund’s expenses, we see that the majority of these expenses could have been included in the budget. For instance, the largest portion of the GEL 47 million spent during the reporting period was allocated to municipal transfers, government administration, various ceremonial events and parliamentary elections (GEL 13 million), all of which could have been planned and budgeted for, according to the performance report of the nine-month budget of the 2024 fund. Moreover, GEL 1.4 million was spent on compensation for families affected by the unplanned natural disasters in February and May 2024.

The reviewed material demonstrates that the expenditures made from the reserve fund exceed its primary purpose – financing expenses that are not foreseeable in advance. Furthermore, several transparency standards do not apply to the fund such as the requirements and restrictions established by the Law on Public Procurement. This increases the risks of inefficient spending of budget resources.

Considering the crucial context, despite the inaccuracies in the presented data, FactCheck concludes that Roman Gotsiridze’s statement is TRUE.