Georgian president submits fiscal austerity bill

Georgian President Mikheil Saakashvili on Tuesday proposed constitutional amendments to limit state spending, the budget deficit and external debt in a bid to attract more foreign investment and boost home-grown business, Reuters reported.

Saakashvili's 'Act of Economic Freedom' calls for spending to be limited to a maximum 30 percent of gross domestic product (GDP), a budget deficit of no more than 3 percent and foreign debt of no more than 60 percent.

The president also called for a referendum on the introduction of new taxes and a rise in existing taxes.

'The adoption of this (bill) will allow Georgia to become more attractive to foreign investors ... and will create new jobs,' Saakashvili told Georgia's parliament after submitting the bill.

Georgia's 2009 budget calls for a deficit of 2.04 percent of GDP, spending of about 30 percent and foreign debt equivalent to about 60 percent.

The former Soviet republic has experienced healthy economic growth in recent years on the back of an investment boom, fed by an expanding banking sector and liberal legislation. But the global crisis and war with Russia have slammed the economy into reverse.

Political unrest this year has further spooked investors and slowed economic activity. The Georgian economy is now forecast to contract by up to 4 percent in 2009.

Georgia's economy expanded by 2.1 percent in 2008, compared with 12.4 percent in 2007. A GDP contraction this year would be the first in 15 years, data from the International Monetary Fund shows.

Saakashvili said the new initiatives also envisaged a ban on increasing the number of licences required for businesses to operate, the creation of new state regulatory bodies and a ban on the state holding stakes in commercial banks.

The government currently does not have any stakes in the 19 commercial banks functioning in the country.