Government debt issuance helps finance deficit in Georgia

Business Materials 8 January 2021 17:15 (UTC +04:00)
Government debt issuance helps finance deficit in Georgia

BAKU, Azerbaijan, Jan. 8

By Tamilla Mammadova – Trend:

The 2020 fiscal deficit is projected at 9 percent of GDP in Georgia, consistent with the adjusted program ceiling, Trend reports via the International Monetary Fund's (IMF's) report.

VAT refunds are projected to be 400 million lari (0.8 percent of GDP) higher than initially planned at the time of the Sixth Review (as part of the program deficit adjustor), providing some further relief to the private sector.

Compared to the projections at the Sixth Review, higher-than-expected revenues (1.4 percent of GDP excluding VAT refunds), largely due to sustained tax performance, and lower-than-expected current spending (0.6 percent of GDP) have helped sustain capital spending, where execution has been better than anticipated (by 1.6 percent of GDP), which will help limit the scarring in the economy.

Georgia did not experience severe physical constraints to the execution of infrastructure projects, supported by a mild first wave of COVID-19 and continued implementation (infrastructure projects were classified as an essential work sector during the lockdown).

Fiscal measures enacted in response to the COVID-19 shock are projected at 3.9 percent of GDP, below the budget allocation (4.3 percent of GDP), with higher-than-projected social assistance and lower-than-projected healthcare spending and support to businesses.

Government debt issuance (both domestic and external) helped finance the deficit and allowed the authorities to accumulate buffers, with deposits projected to reach 7 percent of GDP by end-2020. Gross public debt is projected at 56.3 percent of GDP.


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