Georgia is in a difficult situation due to the coronavirus pandemic and the global economic crisis, the forecast for the country's economy to fall ranges from 4 to 5.5%

The decline in economic activity in the country, caused by restrictions due to the risk of spreading coronavirus, as well as large-scale state assistance to the affected segments of the population, led to an increase in the budget deficit to almost 8%.

One of the main sources of covering the resulting deficit was assistance from international financial institutions, which, on the other hand, led to an increase in the country's external debt. Already in the second quarter, the national debt of Georgia increased by almost 8% and reached $ 6,142. 5 million as of June 30.

According to the state budget for 2020, adopted in June this year, the maximum amount of the country's public debt will increase by 4.5 billion to 27.3 billion lari.

The maximum amount of external debt amounted to 21.4 billion lari, and the inner – 5.9 billion.

At the end of the year, the government's debt will amount to 55.7% of GDP, while 78% of this debt is external. At the end of the first quarter, it is 44.1% of GDP.

A strategy is needed

The state audit service, which controls budget funds, has already recommended that the government update the "government debt management Strategy", which should determine the actions of the authorities to return the indicator of public debt to pre-crisis levels.

The reason for such recommendations was a significant increase in debt and its approach to a critical point, as well as the budget deficit and the difficult forecast economic situation. According to the audit service, the government should assess the possibility of a refund taking into account risk factors.

"We must take into account that if a negative economic scenario develops, the existing fiscal buffer may not be sufficient to Finance needs in the medium term. This increases the risk of taking on additional debt to cover these needs, " the audit service believes.

The main thing is how to spend the money received

Nika Shengelia, Vice-President of the Center for international forecasting and research, believes that the government will not receive full international assistance this year.

"Creditors will monitor the political situation in Georgia, and only then will the aid arrive in the country. Some of the money we have already received is almost spent. Therefore, we are not in a favorable situation, since our external debt has reached 55% relative to GDP. When this data reaches 60%, it is considered an alarming indicator, " Shengelia told Sputnik Georgia.

Although there was a time, the expert noted, when the external debt indicators reached 67% in 2002-2003, Georgia had such debts, but since then the economy has grown a little and managed to pay something.

"In the spring of next year, we need to pay 900 million euros, which the government borrowed in 2008, and in 2013 made a restructuring of this debt. In fact, 900 million euros should be paid, " Shengelia said.

He noted that the main thing is how the borrowed money will be spent. Currently, most of the funds received go to infrastructure projects and are not actually directed to any segment of the real economy in the form of investments. As a result, this leads to an increase in the debt burden, the expert notes.

sputnik-georgia.ru