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What to Expect from 2018 State Budget

Infrastructure, Education and Healthcare as Priorities of the 2018 State Budget.

Total revenues of the 2018 state budget are planned at 12.4 billion GEL, including: tax revenues – 9.490 billion GEL (23.5% of GDP); the remaining part of revenues will be mobilized from other resources. This signifies 23 Tetri from each 1 GEL circulating in the economy is directed to the state budget. The remaining part is accumulated by grants, domestic and external loans and other sources.

This year the Government plans to accumulate a major part of sums from VAT – 4.4 billion GEL. Incomes tax forecast indicator is 3.16 billion GEL, excise tax – 1.45 billion GEL, profits tax – 630 million GEL, imports tax – 60 million GEL, other taxes – 170 million GEL.

It should be noted that the 2018 state budget does not differ much from the 2017 budget. Last year economic growth reached 4%, while GEL exchange rate was about 2.5 in relation to USD and inflation stood at 4%. Out of these key parameters, GDP growth parameter was achieved. According to January-November statistics, in 2017 the economy rose by 4.8%. GEL exchange rate was instable throughout the year, while inflation exceeded 6% at the end  of 2017. In this respect, Georgia’s economic growth parameters target 4.5% economic growth, 3.5% inflation and 2.5 GEL to USD exchange rate.

Parliament of Georgia approved the 2018 budget bill on December 11. Opposition did not take part in voting. They think that widely-advertised structural reforms, enlargement-abolition of ministries have not cut budget spending in reality. By the time of submission of the current year budget, structural changes took place at Ministries. Four Ministries were abolished, but  government expenses have not decreased, despite the number of state sector employees is reduced to 113 613 persons from 116 757 ones.

For example, this year 1.413 billion GEL will be spent on salaries in state sector, 1.201 billion GEL – on goods and services. These parameters stood at 1.397 billion GEL and 1.176 billion GEL in 2017.

Infrastructure, education and healthchare – government of Georgia will prioritize these directions. State budget spending due to sectors is shared in this way: healthcare – 3.52 billion GEL, infrastructure – 1.81 billion GEL; education – 1.18 billion GEL, defense   –  802 million GEL; Interior Ministry  – 569 million GEL; culture and sports – 285 million GEL; environment protection and agriculture – 274 million GEL and so on.

Ministry of regional development and infrastructure will receive 1.815 billion GEL in 2018, including 1.310 billion GEL will be spent on motorways construction works, such as Chumateleti-Argveta section reconstruction and construction, Devdoraki Tunnel construction and so on.

196 million GEL will be spent on improvement of water supply infrastructure, for example, water supply systems construction-installation works will be performed in Pankisi Gorge, villages near Kaspi and Kareli municipalities. As a result, water supply quality will be considerably improved for 20 000 persons. It should be noted that a major rise in spending will be recorded in infrastructural projects in 2018. Finances will rise by 40% as compared to 2017.

As to Ministry of Education and Science, the Ministry will receive 1.186 billion GEL, of which 671 million GEL will be spent on general education, 600 million GEL – on high schools and 133 million GEL on higher education programs, education system infrastructure development will be financed by 97 million GEL. The 2018 budget does not call for growing teacher salaries. However, the Ministry plans to modernize teacher’s salary payment system. However, the Government has not introduced a specific plan yet.

The major allocations will go to Ministry of Labor, Health and Social Protection – 3.528 billion GEL, which is 28% in the 2018 budget expenses. This signifies that 28 Tetri from each 1 GEL paid  to the state budget will finance pensions and social allowances, insurance and other social costs, despite the amount of pensions and social assistance is one of the lowest ones in Europe and CIS space.

The 2018 state budget does not call for growing pensions and social allowances.

By Merab Janiashvili
Economic Analyst
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