PM Kvirikasvili welcomes amendment for easing debt burden in Georgia

Georgia’s Prime Minister Giorgi Kvirikashvili welcomes an amendment package for easing excessive debt burden in Georgia, saying "it is important for the economic and financial sustainability in our country”.

Finance Minister Mamuka Bakhtadze presented the amendment package to the governmental authorities at today’s government meeting.

It is very important for us that the dynamics of our country’s development which is reflected in high rates of economic growth to be sustainable and not be under threat due to the risks of excessive debt burden”, Kvirikashvili said.

He stated that Georgia’s economic team which unites the Ministry of Finance and the National Bank of Georgia has the full support of the government.

Earlier in April of this year when Bakhtadze announced the initiative to reduce the debt burden in Georgia, he said that the ratio of debt burden to income of the borrower was "incredibly high”.

To explain, debt burden is the cost of servicing debt. For consumers it is the cost of interest payments on debt.

Bakhtadze explained that the reason of the excessive debt burden in Georgia was issuance of the loans without meaningful analysis of consumers’ solvency.

To overcome this challenge the National Bank of Georgia set regulations on responsible lending practices.

Starting from May 7, 2018 commercial banks in Georgia have been restricted in issuing loans without a meaningful analysis of consumers’ solvency. The total amount of these loans must not exceed 25 percent of the supervisory capital of commercial banks.

Also, the total amount of loans guaranteed by real estate must not exceed 15 percent of the bank’s supervisory capital without an analysis of the client’s solvency, while the loan to value ratio must not exceed 50 percent when issuing a loan, the NBG announced.