Koba Gvenetadze, President of the National Bank of Georgia declares that the budget deficit affects inflation in other equal conditions.
“Foreign aid, which the government attracted in 2020, is intended to replenish the reserves of the National Bank and directly comes to the NBG. But, part of the funds is for budget support. If this is budget aid, it goes to the government account, then we take the foreign currency and give GEL in return to the government.
Of course, this is a budget deficit and a high budget deficit has an impact on inflation. The lower the budget deficit, the less impact it will have on inflation under other equal conditions. I mention equal terms, because other factors may affect the inflation as well,"- said Koba Gvenetadze.
The budget for 2022 is planned on 4.2% deficit, but due to the pandemic, the budget deficit has been rather high in 2021 as well as in 2020. The budget deficit hit a record 9.4% last year, while the rate stood at 6.7% this year.
