A statistic analysis of sustainability of Georgia’s government debt

Abstract

The decrease of economic growth rates in Georgia and increased fiscal deficit and state debt (both, foreign and internal) of the country in 2012-2018 have made it actual to assess the fiscal sustainability of the country both, in medium-term and long-term perspectives The analysis evidenced that according to the realistic scenario of the ministry of finance the marginal indicators of public debt sustainability (public debt/ GDP, state debt/budget revenue and public debt/export) of Georgia in the medium term remained below the thresholds. Despite this, the fiscal sustainability of Georgia may be threatened in the long-term perspective due to the different shocks (severe currency devaluation being an important factor among them), significant growth of the future social liabilities, growing scales of subsidies for different branches of economy and increasing gross external debt of Georgia (which already exceeds 100% of GDP). Without urgent adjustments in the fiscal policy, disclosures and management of fiscal risks, in the medium-term and long term, the government of Georgia may find it necessary to drastically cut the budgetary expenses. The article emphasizes that the macroeconomic stability and stable economic growth of Georgia in the medium-term and long-term perspective needs gradual adjustments of the expenditure and debt policy.