Irakli Kovzanadze, Chairman of Budget and Finance Committee of the Parliament of Georgia, says that in case of aggravation of the epidemic situation, announcing another "lockdown" in the country will be a difficult decision because "businesses are exhausted."
As Kovzanadze said on BMG's TV Program "Analytics," Georgia is in a double economic shock - if in many other countries reduced economic activity is handled with a smoother monetary policy, it is impossible to do so in Georgia, because the national currency exchange rate is hit and inflation is rising. Because of this, the National Bank has to increase its refinancing rate.
"In general, it is not advisable to have an additional "lockdown" because it means even more restrictions for the business. In some areas, businesses are already exhausted. The population of Georgia is worried about various problems - high dollarization, inflation, and so on.
Here we have to think in several directions. We have lost tourism. The economy is constrained by monetary policy. What does this mean? For example, if there is an external shock in some other country, monetary policy can be eased. Here, in Georgia - it will not work. Therefore, we can say that we are in a state of double shock; When monetary policy is further tightened, it will have an additional impact on the economy.
On the other hand, the protection of human life and health is at stake. Therefore, along with maintaining macroeconomic stability in the country, the challenge should be to save the health and lives of citizens, "- said Kovzanadze.
In the event of another crisis in Georgia, the IMF recommends that the government of the country finance the new social assistance program not by borrowing new debt but by adjusting the 2021 budget and transferring funds from infrastructure projects to social protection.
The chairman of the Parliamentary Budget and Finance Committee says that in case of aggravation of the crisis, the Georgian government will have to decide how to provide new social assistance.
"If we go with the "Lockdown," scenario then the population will need help. Fiscal incentives will be needed. An additional increase in the deficit can't happen as the IMF suggests doing a budget restructuring to reduce capital expenditures and take it in another direction. On the other hand, fiscal consolidation also means that taxes should increase. Who should we increase taxes for - businesses that are already exhausted?!" - said Irakli Kovzanadze.
