According to the statement of the Minister of Finance of Georgia, Nodar Khaduri, the income part of the first quarter of the 2016 state budget was fulfilled in surplus. In total, the amount of income accumulated in the state budget in January-March 2016 reached GEL 2,189 million. This number is GEL 40 million more than scheduled and the fulfilment rate is 101.9%.

verified the state budget fulfilment indicators for 2016.

According to the information of the State Treasury, the income part of the first quarter of the 2016 state budget was fulfilled by 102.1% and reached GEL 2,194 million whilst the expenditures part was fulfilled by 95.3% and reached GEL 2,267 million (see Table 1).

 First Quarter of 2016 State Budget Fulfilment Indicators in GEL Million

In spite of the tax revenues part being fulfilled by 104.7%, one particular circumstance caught our interest. The income tax part was fulfilled by 70%, the profit tax part was fulfilled by 70% and the value added tax part was fulfilled by 82%. At the same time, the excise tax part was fulfilled in surplus by 105.5%, the import tax part was also fulfilled in surplus by 125% and the other taxes part was fulfilled by 8,775%. In the end, the additional GEL 433 million which was collected as a part of other taxes made the tax revenues surplus fulfilment rate possible. In the State Treasury’s report on budget incomes, we can see that GEL 429 million of the aforementioned GEL 433 million is categorised under the component entitled as Taxes Paid in Excess or Taxes Paid by Mistake. In the first quarter of the previous year, only GEL 6 million was collected in the other taxes part. Therefore, we can conclude that taxpayers have either paid certain sums in advance in the first quarter of 2016 (this will have a negative impact in the remaining months of this year) or this is a technical mistake on the part of the State Treasury for not fully categorising the tax revenues.

The Government of Georgia’s performance in terms of attracting foreign grants is low (50%). One of the reasons for this is that Georgia was supposed to receive GEL 24.5 million in terms of a budget assistance grant but the country has not yet received the money.

In regard to the second part of the budget – expenditures (expenses) were fulfilled by 95.3%. A particularly low fulfilment rate is for capital expenditures (83%) and state purchase of goods and services (87%).

The fulfilment of the budget income part in surplus, whilst having a 95.3% fulfilment rate in expenditures, resulted in a decreasing of the budget deficit. GEL 213 million was supposed to be spent under deficit spending but, in fact, only GEL 48 million was spent. This could have been a positive result were the remaining three quarters not still ahead when larger expenditures will be required but with less money coming in owing to income received in advance. Therefore, traditionally, this trend will cause a hike in expenditures and a budget deficit at the end of the year which is harmful for the macroeconomic stability of the country.

The income part of the first quarter of the 2016 state budget was indeed fulfilled in surplus. This was caused by fulfilling the tax revenue component by 104.7%. However, in the detailed information published by the State Treasury we can see that of the increased amount of tax revenues, GEL 433 million is categorised under the title of Taxes Paid in Excess or Taxes Paid by Mistake. This means that taxes were either paid in advance or the received revenues were not properly categorised.

In regard to the expenditures part, the tradition was kept this year, too, and the fulfilment rate was 95%. This had a positive impact upon the macroeconomic stability for the first quarter of 2016 and relieved the pressure on the budget deficit, the GEL exchange rate and price levels. However, this might also make the fulfilment of the annual budget more difficult and result in spending larger sums of money in the remaining period of the year than was previously planned.