GEO

Georgian Budget Code Encouraging Lack of Transparency

06 March, 2012

This is the second in a two-part series of blog posts on changes to Georgia's Budget Code. Read the first post here.

1.Lax Responsibility Accounting for Variations between Originally Approved and Revised Appropriations

Apart from liberalizing intra-programme line item realignment, which we wrote about in our previous post, the Budget Code raised the margin of variations between the originally approved and revised appropriations that needs to be accounted for from 10% to 30% leaving so-called “general payments” out of the equation (Article 56).  According to Article 27 general payment appropriations include internal and foreign debt service, the GoG and Presidential contingency funds, the regional project fund, the fund for payment of arrears and enforcing court decisions as well as transfers to sub-national governments. All these payments are too large a portion of the budget not to be accounted for when the variations between their originally approved and revised amounts exceeds a 10% margin. The Law on Budgetary System, which was replaced by the Budget Code, required that variations higher than 10% between the originally approved and revised amounts including general payment appropriations always be accounted for.

Thus the GoG took two steps backwards with this change: 1. 30% is higher than 10%, which compromises transparency of spending; 2. general payment appropriations may capture categories other than those listed above, which means quite a number of other appropriations may be included in the category thus bypassing the requirement for explaining the variations.

2.European Practice

Variations between originally approved and revised appropriations are not unique to Georgia. Unlike other countries, however, Georgia has a higher margin for explaining the variations. Budgeting in Eastern and Central European countries (Slovenia, Estonia, Slovakia, the Czech Republic, Poland, Croatia) makes spending much more predictable than in Georgia.

3. We recommend that:

  • variations between the originally approved and revised appropriations be accounted for when the margin thereof exceeds 10%;
  • variations between originally approved and revised appropriations include the so-called general payments (See Ch 1 above for definition of general payments);
  • the GoG give careful consideration to the European as well as other applicable experience making budgeting more predictable.

 

Author: Mikheil Kukava