How much will the state budget be in 2019 and what will it be spent on?
The Georgian parliament will soon approve the state budget for 2019.
JAMnews takes a look at the proposals, the government’s priorities and what the main differences are compared to last year.
How big is the budget?
In 2018, the state budget of Georgia was 12.44 billion lari, almost five billion USD.
In 2019, the Georgian government will spend approximately 13.1 billion lari (5 billion USD) – an increase of 630 million GEL (about $237.8 million) in comparison to 2018.
To get a sense of the size of the government’s budget: Latvia and Estonia will spend twice as much in 2019, with budgets as large as 10 billion USD, despite the fact that there are more people in Georgia than both Latvia and Estonia put together – Georgia is, in other words, a low-income country.
Where does the revenue come from?
According to preliminary forecasts, the state budget will receive about 10.9 billion (about $4.1 billion) from the country’s economy, and 2.2 billion lari (about $830 million) via loans.
Around 9.6 billion ($3.6 billion) will be from taxes, which is about 155 million ($58.5 million) more than in 2018.
Another 383 million GEL ($144.6 million) will go to the budget in the form of grants, and 460 million GEL ($173.6 million) from other sources such as state enterprises, fine collection, etc.
The government expects to receive 70 million GEL (about $26.4 million) from privatisation, and 346 million GEL [about $130.6 million] from the return of previously issued loans and from the use of deposits.
What will the money be spent on? The main priorities of the 2019 budget
State budget expenditure for 2019 will increase by 630 million lari (about $237.8 million) compared to 2018, totaling just over 13.1 billion lari (about $ 4.95 billion).
1. The largest sum, 2.5 billion lari (about $943.8 million), will be spent on infrastructure projects – 500 million lari (about $188.7 million) more than in 2018. Another 1.3 billion lari (about $491 million) will be spent on improving the road infrastructure, of which 813 million lari (about $ 307 million) will be used for highways. A further 300 million lari (about $113.2 million) will be used for the restoration of water supply systems, and 73 million lari (about $27.5 million) will be spent on the construction and restoration of public schools and other institutions.
2. Pensions are the second biggest burden on the budget. Starting 1 January 2019, pensions in Georgia will increase by 20 GEL and amount to 200 GEL (about $75) per person per month. In 2019, a total of two billion lari [about $755 million] will be spent on pensions compared to 1.7 billion lari (about $642 million) in 2018.
3. The third largest expenditure is funds allocated for the repayment of public debt – up to 1.6 billion lari (about $604 million). Around 934 million lari (about $352 million) will go towards repaying debt, and 624 million lari (about $235.5 million) to cover interest.
However, this does not mean that the country’s debt will be reduced in 2019. On the contrary, the government is going to take on new foreign debt to the amount of 2.2 billion lari (about $830.5 million), since the country’s income will not be enough to cover all expenses. Ultimately, with all the deductions, the national debt of the country will increase by one billion 252 million lari (about $473 million).
4. Next year, an additional 129 million GEL (about $48.7 million) will be spent on education, amounting to 1.4 billion GEL (about $528.5 million). The financing of general education will increase by 48 million lari (about $18 million), while funds for vocational education will increase by six million (about $2.3 million) and higher education by 20 million (about $7.5 million). This is the fourth largest expenditure.
5. Around 1.1 billion lari (about $415 million) will be spent on healthcare in 2019, which is 60 million more (about $22.5 million) than in 2018. The country’s universal healthcare programme will receive 50 million more (about $18.8 million) than last year, totalling 754 million lari (about $284.5 million).
However, it’s worth noting that in 2018, the budget for general public healthcare was overspent by 30-35 million GEL (about $12.5 million), and thus the real increase in this year’s budget for healthcare will only be between 12 and 20 million GEL (about $6.8 million).
What ministries will receive the largest amount of financing?
The largest amount, up to four billion lari (about $1.5 billion), will be given to the Ministry of IDPs, Labour, Health and Social Protection.
These funds will mainly be spent on pensions, healthcare and social assistance.
This is followed by the Ministry of Regional Development and Infrastructure which will receive two billion lari (about $755 million) and the Ministry of Education, Science, Culture and Sports which will receive 1.5 billion lari (about $566 million).
What changes are there compared to previous years? Significant changes in the budget for 2019
Next year, the number of people who receive their salaries directly from the budget will decrease from 113,613 people to 112,072, meaning 1,541 people will lose their jobs.
One of the main changes affects local authorities, that is, municipalities.
In 2019, municipality budgets will receive funds from VAT income – 19 per cent of VAT, to be exact, which according to forecasts should amount to 947 million GEL (about $357.5 million).
Last year, direct funding for municipalities amounted to 901 million GEL (about $340 million) – while this year will mark a 46 million GEL (about $17.4 million) increase.
How much each municipality will receive depends on several factors and will be calculated by a special formula – the area of the municipality’s territory, the number of its inhabitants, the number of children under six and six to eighteen years of age, whether there are people in the municipality who are residents of highland regions, and so on.
Taking these criteria into account, almost 50 per cent of the above-mentioned 947 million lari, which is 473 million lari (about $178.5 million), will go to Tbilisi. Five per cent, or 48 million lari (about $17 million), will go to Batumi. Another 3.5 per cent, or 33 million lari (about $12.5 million), will go to Kutaisi, and so on.
This has caused changes in other parts of the budget.
Since 19 per cent of the VAT will be directed to the municipalities, the state budget income from VAT will be reduced, but state budget expenditure will also be reduced by 687 million lari (about $259 million).
Another important change in the budget for next year is funding for the administration of the president of Georgia – who will receive only six million GEL (about $2.3 million) instead of the previous 14.8 million GEL (about $5.6 million).
Financing for the presidential administration will thus be reduced by 3.8 million lari [about $1.4 million]. The remaining five million lari (about $1.9 million) will be freed up due to the complete abolition of the president’s five-million GEL reserve fund.
Only 60 people will work in the presidential administration, instead of the former 140.
The money saved on the presidential administration will be received by the Pension Agency, a new structure that is being created as part of the pension reform. The agency’s financing in 2019 will be 3.8 million lari (about $1.4 million) and 50 people will work in its offices. Furthermore, an additional 90 million lari (about $34 million) will be added to pension deposits from the budget.
Another change in the budget is that the renovation and construction of new schools will be led by the Ministry of Regional Development and Infrastructure (MRDI) instead of the Ministry of Education. The MRDI will be allocated 72.5 million lari (about $27.3 million) for this purpose.