Parliament chamber in Kutaisi, July 17, 2015

Parliament confirmed on Friday with 78 votes to 18 amendments to the 2015 state budget cutting economic growth forecast from 5% to 2% and reducing initially targeted GEL 7.6 billion in tax revenues by GEL 200 million.

Funding cut in an amount of total of about GEL 160 million will affect most of the ministries. But the overall budgetary expenditures set for this year remain unchanged at slightly over GEL 8 billion as the government plans to offset reduced tax revenues by raising GEL 185m in foreign loans and over GEL 40m in budgetary support grants from donors. Government also expects additional GEL 150 million this year from mobile operators in license fees for spectrum used to provide 4G services. 

Part of the funds, cut from the ministries, according to the government, will be redirected to various infrastructure projects and to cover part of the damage caused by deadly flood in Tbilisi on June 12-14.
 
Deputy Finance Minister, Giorgi Kakauridze, said that these changes will allow to prevent increase of budget deficit to 3.7% of GDP and to keep it at 3%.

He told lawmakers on July 17 that deficit might be even less than 3% as revised economic growth of 2% is a conservative estimation and the growth can actually reach 3%.

Initially estimated state debt of GEL 11.8 billion is now increasing to GEL 13.78 billion, attributed mostly to depreciation of the Georgian currency lari. It pushed state debt-to-GDP ratio up to 45%, which exceeds target limit of 40%, set by government’s long-term economic strategy paper.

Back in December, when the Parliament was discussing the 2015 state budget, lawmakers from the opposition UNM party were warning the government that neither the 5% economic growth forecast nor target of GEL 7.6 billion tax revenue were realistic. During the debates on budgetary amendments on July 17, UNM lawmakers were reminding Deputy Finance Minister about their warnings, saying that at the time decline of external earnings in the form of reduced exports and remittances had been in place for several months already. But Kakauridze was responding that government’s initial projections were in line with those of IMF.

Breakdown of spending cut per ministries is as follows:

• Ministry of Infrastructure and Regional Development funding declines by GEL 54.5 million to GEL 945.5 million; decline is mostly attributed to a failure to implement number of infrastructure projects, which were planned for this year;
• Ministry of Agriculture funding is reduced by GEL 25.5 million to GEL 267.45 million;
• Education Ministry funding is down by GEL 13.1 million to GEL 340.8 million;
• Energy Ministry funding is reduced by GEL 10.7 million to GEL 114.3 million;
• Foreign Ministry funding is down by GEL 10.5 million to GEL 89.5 million, mostly at the expense of funds, which were originally aimed at purchasing buildings for Georgian embassies abroad;
• Interior Ministry funding declines by GEL 10 million; GEL 36 million from the ministry’ budget will be relocate to fund planned State Security Agency, which will be established from August 1 after decoupling security and intelligence agencies from the Interior Ministry and as a result the latter’s 2015 budget will stand at GEL 591.65 million;
• Finance Ministry funding goes down by GEL 9 million to GEL 91 million;
• Defense Ministry funding is reduced by GEL 6.1 million; but because Delta military industrial complex was transferred from the Economy Ministry back to the MoD, the latter’s total 2015 budget increases to GEL 667.3 million; mainly for the same reason, related to transfer of Delta, funding of Economy Ministry is reduced from GEL 120 million to GEL 85.3 million;
• Prison system ministry funding declines by GEL 4.5 million to GEL 150.5 million;
• Justice Ministry funding goes down by GEL 3.6 million to GEL 66.1 million;
• Ministry of Environment Protection funding declines by GEL 2.4 million to GEL 36.57 million;
• Ministry of Culture funding is reduced by GEL 1 million to GEL 94 million;
• Ministry of Sports funding goes down by GEL 200,000 to GEL 69.8 million;

Funding of the Parliament is reduced by GEL 6 million to GEL 46 million and of the Intelligence Service by GEL 1.6 million to GEL 12.4 million.

Government’s discretionary reserve fund is increased by GEL 20 million to GEL 70 million and GEL 1 million is added to the Special State Protection Service (SSPS), increasing the latter’s funding to GEL 54 million.