This week Parliament will begin work on a discussion draft for amendments to the 2003 budget. The International Monetary Fund has recommended the amendments, which are aimed at closing the fiscal gap. The draft, developed by the Finance Ministry, considers cutting expenditures by 86 million Lari (USD 40.3 million) and increasing revenues by 45 million Lari (USD 21.1 million).
If Georgia fails to revise the 2003 budget, it will be impossible for the Georgian government to reschedule Georgia’s debts with the Paris Club, as the country will be deprived of the IMF’s support. The IMF has set an August 15 deadline for implementing its recommendations.
In his Monday radio broadcast on August 11, President Shevardnadze called on Parliament to adopt such a draft. ̶!
0;If we fail to revise the budgetary targets, which are one o!
f the main recommendations of the International Monetary Fund, we will find it difficult to regain the Fund’s support,” Shevardnadze said.
Heated debates are anticipated in Parliament because the budgetary issue positions the government for increased criticism from the opposition block, which blames the government for the budget deficit. The opposition is also demanding that the State Minister’s accountability for the budget be raised. Current State Minister, Avtandil Jorbenadze, vowed in the beginning of 2003 to balance this year’s budget. However, data from the first 6 months of 2003 shows that budget revenues fell short of their target by 87 million Lari (approximately USD 41 million).
The figures for the budgetary amendments suggested by the government do not completely correspond to those recommended by the IMF. “There is a difference in 10 million Lari [USD 4.6 million] from the IMF recommendations,” admitted!
Temur Basilia, Economic Adviser to President Shevardnadze on August 8. “The IMF has suggested a reduction of expenditures by 96 million Lari [USD $44.6 million],” he added.
“The amendments to the budget have been drafted once again based on unrealistic estimates. The government intends to cut expenditures by 86 million instead of the 96 million Lari recommended by the IMF,” reads the conclusion from the Parliament’s Budgetary Office.
The 10 million Lari difference has been caused by protests from several ministries and governmental departments trying to safeguard their budgets. For example, protests were loudest in the defense and security bodies, which initially were poised to accommodate the largest cut – 20 million Lari (USD 9.3 million). Ultimately, the Finance Ministry had to take these concerns into consideration and so the Defense, Security and Interior Ministries funds will be reduced by only 18 million Lari (USD 8.4!
million).
The controversy has been caused by the gove!
rnment’s intention to increase revenues by raising taxes on mobile phone communication and apartment building construction. The government hopes to accumulate an additional 31 million Lari, out of a planned 45 million, by increasing taxes.
If Parliament approves the proposal, taxpayers will have to pay an additional 10% of the total sum of mobile calls and an additional 85 Lari (up to USD 40) for every square meter of space in newly constructed apartment buildings.
“The government tries to accumulate additional budget revenues not through improved administration, but directly at the expense of the taxpayers. The taxpayers are supposed to carry the whole burden of these additional 45 million Lari,” Roman Gotsiridze, head of the Parliament’s Budgetary Office, says.
The government also intends to increase taxes on casinos and other gambling venues. The rest of the funds – 14 million, out of a planned 45 million, will be a!
cquired through improved administration in tax collection and an enhanced fight against smuggling. The Tax Inspection together with the law enforcement agencies already began special actions in this direction last week. They initiated a large-scale inspection of open markets, gas stations and major trading centers in both the capital city and the regions.
Experts say that the estimated additional income from the newly imposed taxes will not be available, best case scenario, until next year. “Thus the government’s expectations for allocating the additional funds in this year’s budget look too optimistic and unrealistic,” Roman Gotsiridze says.
It will be hard for the government to secure the 118 Parliamentary votes necessary for passing the budgetary amendments. It is anticipated that the Parliamentary opposition factions will demand to raise the government’s accountability in exchange for supporting the amendments.
“Eve!
ry self-conscious MP should make a proper response to the gov!
ernment, which has failed to meet the budgetary targets,” MP Mikheil Machavariani of the United Democrats opposition party and former Tax Revenue Minister, told Civil Georgia.
The Parliamentary Chairperson, Nino Burjanadze, said in an interview with Civil Georgia on June 20 that she would support the revision of the budgetary targets; however she would demand to raise the government’s accountability for the budget deficit. “Cutting budgetary expenditures is undesirable but necessary. The budget has never been balanced in the country since 1997. Therefore I believe the government must be accountable,” Nino Burjanadze said.
By Nino Khutsidze, Civil Georgia