Finance Minister sums up 2020, discusses forthcoming challenges

This year Georgia has spent its fiscal buffers (reserves) which increased the 2020 budget deficit to 9.1 per cent, while government debt to GDP ratio increased to 59.9 per cent, said Finance Minister Ivane Matchavariani earlier today when presenting the 2020 annual activity report of the Finance Ministry.

Georgia was the first country whose anti-crisis plan was confirmed by the International Monetary Fund (IMF) back in April, the reason for which was good macroeconomic parameters and high trust in the government from the IMF,” said Matchavariani.

International partners allocated $1.9 bln for Georgia to help fight the coronavirus pandemic, he said. 

The financial institutions which assisted Georgia amid the pandemic are the Asian Development Bank (ADB), The German Development Bank (KfW), the French Development Agency (AFD), the European Union (EU), the International Monetary Fund (IMF), the World Bank (WB), the Asian Infrastructure Investment Bank  (AIIB) and the European Investment Bank (EIB).

Matchavarani noted that Georgia is in first place with pandemic support per capita by the support of donor organisations.

Despite the support of the international financial institutions, Georgia allocated 420 million GEL for the healthcare system, over 1.2 billion GEL to support citizens amid the pandemic, over 1.6 billion for business support.

In 2020 the tax liabilities of more than 50,000 taxpayers have been postponed which was more than 400 million GEL and tax benefits have also been implemented.

Meanwhile, he noted that tax benefits are not good for the economy while said that the government supported business as much as possible despite the fact that it does not support the idea of tax benefits. The Minister noted that this practice is implemented in the past and cannot be lifted at once, and said that it should be assessed where this tax benefits can be lifted and maximally equalise the tax burden for all sectors.

Taxing different sectors in different ways is very bad, not only fiscally, but in general it hinders the growth potential of the economy and pushes consumers towards misbehavior. We do not support individual benefits by sectors,” he said.

Matchavariani also spoke about the challenges the country has for future years and noted that rapid economic growth is not forecasted as a result of a pandemic. 

The goals of the Finance Ministry for next year are: decreasing the government debt, decreasing budget deficit to 3 per cent to GDP, reducing capital costs to eight per cent of GDP, reducing the shadow economy, minimising fiscal risks and creating companies which will support economic growth of the country.