Is Georgia saving the lari with the help of budget cuts?

Is Georgia saving the lari with the help of budget cuts?

The government of Georgia plans to cut budget expenditures: a corresponding package of changes has already been prepared and announced today by Georgian Prime Minister Giorgi Kvirikashvili.

"One of its components of the transition to the tax reform, the so-called the Estonian model, is budget cuts. It will be one of the constituent parts of the tax reform, which is to have a positive effect on the lari," Georgia Online cites Kvirikashvili.

Economy Minister Dmitry Kumsishvili also doesn't speak about details, but he confirmed that some changes have been planned in the budget that may have a positive impact on the course of the lari.

"In connection with the lari exchange rate we see a clearly positive trend, the minister said today, noting that the rate of the lari against the US dollar reached the level of 2.46. On this basis, we see a clearly positive tendency. I can confirm that I am personally in daily contact with both the National Bank, and with the Ministry of Finance. It is of fundamental importance that all the branches involved in the process could undertake coordinated action to a greater or lesser extent," Kumsishvili said.

Vestnik Kavkaza asked Georgian experts what budget items will be affected by the future budget reduction and how it is justified to stabilize the national currency. 

As the head of the Institute of Management Strategy, Peter Mamradze, stated in an interview with a VK correspondent, first of all spending on administration will be reduced. "Unfortunately, these costs were unnaturally increased during the time of Saakashvili, but the new government didn't decrease them. They decided to allocate additional bonuses and increase the number of staff."

The head of the Center for Global Studies, Nana Devdariani, also believes that first of all a reduction of bureaucracy will affect salaries and other expenses corresponding to this budget.

"It is necessary to reduce the amount of the costs of civil servants now, but the social budget items should not be touched," the expert said.

Speaking of how the overall budget cuts are justified and whether the government could find another way, the head of the Center for Global Studies explained that all the complaints were just due to high costs, and in principle it should have been done earlier.

The editor of the journal Economy of Georgia, Emzar Dzhgerenaya, agreed with his colleagues: first of all funds for the maintenance of the state apparatus and bureaucracy should be reduced.

According to the expert, this reduction won't affect social issues, financing of pensions, the poor population, the defense or the Interior Ministry, the so-called social sector," he stressed.