Negotiations are underway between the Government of Georgia and the International Monetary Fund to increase the 2021 budget. In case of successful completion, the government will borrow more domestic and foreign debt in 2021 than is currently set.
According to the initial draft of the 2021 budget, the government plans to spend 17.07 billion GEL, a record budget figure in the history of independent Georgia. However, it is important to note that the first draft of the budget does not include funding for the Covid Crisis. According to the government, these costs will be reflected in the final submission budget.
Consequently, the budget deficit increase is also related to the mobilization of expenditures against the crisis. It is unknown what the government will do in case of IMF's approval -will the deficit be financed by domestic debt, or will the government attract new foreign debt?
"Work is underway on healthcare related to the spread of COVID-19. We are also working on funding needs of social or business support measures due to the slowdown in economic growth. In the framework of the 7th review of the program with the International Monetary Fund, active work is carried out on the financing needs of the above-mentioned measures and the updated forecasts of the fiscal parameters related to them.
"Among them, it is important to agree on the rate of 2021 and the medium-term deficit," - said in a document released by the Ministry of Finance today."Among them, it is important to agree on the rate of 2021 and the medium-term deficit," - said in a document released by the Ministry of Finance today.
In 2020 the Government of Georgia took a new foreign debt of GEL 6.2 billion and a domestic debt of GEL 1.85 billion. As a result, the budget deficit has reached a record high of 8.5% in recent years.
The government planned to reduce the deficit to 5.1% by 2021.
