GEO

The Ministry of Finance published inaccurate information on its 2014 spending and the budget deficit

23 March, 2015

 

Transparency International Georgia’s examination of the situation surrounding the 2014 budget’s expenditures section has demonstrated that in 2014 more than GEL 150 million was left unspent, which is GEL 82 million more than the GEL 70.19 million, which was officially reported as unspent.

This situation is further aggravated as the Ministry of Finance concealed this information through manipulating budget deficit data.

On the 12th of March, at a joint session of Parliament’s Sector Economy and Economic Policy Committee and Budget and Finance Committee, Finance Minister Nodar Khaduri noted that the  balance of the revenue reserve account of the Treasury Single Account (TSA) account  holds more than GEL 80 million (GEL 82 million, according the Treasury). This is a record high for the Treasury’s revenue return sub-account, which for a number of years, has held GEL 5 million on average.

 

The Ministry of Finance did not account for the GEL 82 million on the Treasury’s sub-account in the calculation of the budget deficit. Had this money been put on the Treasury Single Account, the Government of Georgia would have needed to provide an answer as to why it could not spend this GEL 82 million along with the GEL 70.19 million which remained unspent in 2014, according to the Treasury’s official figures. In other words, why did the government not spend more than GEL 150 million?

 

Notably, the Government of Georgia experienced an underspending problem in 2013 as well and received severe criticism for it. In our assessment, the government decided to decrease the amount of underspent budget in 2014 in the official statistics by increasing the budget deficit figures. According to Transparency International Georgia’s calculations, instead of the official 3.2%, the budget deficit was 2.95%. As is well known, the budget deficit is one of the indicators which potential investors, international credit rating organizations, and international financial institutions use to assess a country’s fiscal position. Therefore, the manipulation of the budget deficit data for political purposes is absolutely unacceptable. This sets a very bad precedent and it is possible that it will negatively affect the reliability of Georgian government financial statistics in the eyes of investors, donors and international financial institutions.

Author: Mikheil Kukava