Op-Ed: Difficult times ahead for economy of Abkhazia
The economic crisis continues to grow in Abkhazia, and the worst is yet to come. The authorities will have to pass some unpopular reforms. The first should be to downscale the huge bureaucratic apparatus.
The crisis has become a chronic problem in all areas of the Abkhaz economy. For the locals, it is just part of daily life, like their morning cup of coffee. But then there is the pandemic.
Closed borders, no tourists and murky waters ahead. A difficult decision must be made:
• Open tourist season and earn some money, but throw the entire healthcare system under the bus?
• Or continue isolating from the outside world — starve, but stay healthy?
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“There’s no money”
Prime Minister Alexander Ankvab has already announced that prospects for the near future are not good – public sector wages for June and July 2020 will be paid very late.
Minister of Taxes and Duties Daur Kurmasia also made a grim statement: there are no more reserves left to replenish budgetary funds.
Minister of Finance Vladimir Delba just as dispiritedly predicted a 10% drop in GDP by the end of the year, and a hole in the budget of 2,000,000,000 rubles [about $430,000,000].
What actions the government will take, other than trying to fix a hopeless situation, is still unknown. And it’s time to tell the authorities what everyone has been thinking for a long while:
“We can’t live this way.”
What’s wrong with the Abkhaz economy?
How can we envision a bright future when all the state treasury revenue goes to paying public sector employees? And half of them are just part of the bureaucratic machine, unable to do anything meaningful?
The business sector is simply in no condition to sustain such a large group of officials.
The ratio of those working in the real sector of the economy to those in the state apparatus is one to four, and if we add retirees, then it is one to seven.
If a feudalistic government had more landowners than peasants, it would collapse within a year. Despite all of its deficiencies, at least the feudalistic system obeyed the fundamental laws of economics.
But in modern Abkhazia, changes of power occur through storms on the presidential palace. Perhaps that is why no one here takes the laws of economics into account. The authorities have already developed a deep-seated fear of passing unpopular measures.
They have no problem discussing reforms, continuing to dream, and doing nothing. But they lack the ability and courage to actually take action.
Abkhaz authorities are afraid to face the consequences of any of their actions.
Meanwhile, it is precisely this inaction which has led to economic collapse.
What must be done?
It is time for the president and the government to say openly that the budget is not able to sustain a bureaucratic apparatus that is simultaneously so bulky and so inefficient.
Significant reductions are needed, and not just on paper, but in practice. If they continue waiting for the best time to pass an unpopular measure, it may never come.
First of all, the pandemic and its ramifications rid the electorate of any expectations of a positive outcome.
Secondly, the government in Abkhazia is brand new, and no matter what it does now, it will not be overthrown. Each Abkhaz president usually gives a deadline for the time needed to complete initial reforms, before which even angry and dissatisfied opponents will not approach the presidential palace.
Thirdly, it’s summer, Abkhazia is in the subtropics, and people won’t die of hunger. It certainly will not be worse than it was in the 1990s.
After the Georgian-Abkhaz war (1992-1993), Abkhazia was under a severe blockade for six years, including from Russia. Men from 18 to 60 could not legally enter the neighboring Russian Adler Microdistrict, and the sole source of income for most people was selling tangerines in that area.
Delaying the situation will be more expensive. By next year, the world may make find a solution to the coronavirus, but there will definitely not be any respite for Abkhazia.
And another challenge awaits the country: for the next four months at least, the only power station supplying Abkhazia, the Ingur hydroelectric plant, will be undergoing repairs.
The republic will pay for the energy consumed during the time when the hydropower plant is nonfunctional, which will be supplied by Russia at Russian prices. These are known to be almost ten times higher than in Abkhazia.
Moscow will then deduct this money from the financial assistance that Abkhazia receives annually.
At the beginning of 2020, the Ingur power plant was shut down for just a couple of weeks, and the bill was about 500,000,000 rubles [about $7,240,000].
The payment for the last four months may be the largest annual sum in the history of financial assistance between Moscow and Abkhazia. Compared to the long downtime of the Ingur hydroelectric power station, the financial consequences of the pandemic will seem like pennies.
Therefore, the Abkhaz authorities must admit honestly to their people that it will be impossible to live like this much longer.