Beso Namchavadze, economist of Transparency International Georgia declares, that as of the draft budget, the situation in the country has deteriorated due to the pandemic, therefore the economic growth forecast for 2021 will be 4.3% instead of 5%.
“This has already increased the debt ratio to GDP and at the same time, as it is the second wave of the pandemic, it has become necessary to increase social and other spending, this is the government’s explanation of why it has become necessary to increase government debt. With the current draft budget for 2021, this was well balanced, as debt would be increased merely by 560 million GEL, but it did not provide impact of the second wave of the pandemic. Now, as the Ministry of Finance says, the government debt will be within 60%, but it will not be only foreign debt, domestic debt will also increase, although a large share will probably be foreign debt," - said Beso Namchavadze.
The analyst believes that according to the economic act, the Georgian government is limited to increase the debt to more than 60% of GDP, however, the same act allows exceptions in the case of force majeure. But, the debt should be reduced below 60% by 2023.
According to Beso Namchavadze, debt of more than 60% is considered as a heavy burden for a developing country and is not desirable.
