EKONOMISTI
The international scientific and analytical, reviewed, printing and electronic journal of Paata Gugushvili Institute of Economics of Ivane Javakhishvili Tbilisi State University |
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Journal number 4 ∘
Lasha Kelikhashvili ∘
Characteristics of the institutional environment of Government debt management in Georgia Expanded Summary This article analyzes the dynamics of the government debt for both globally and separately for Georgia, and in this context, the existing institutional environment in Georgia from the point of view of debt management. Due to its specificity, the research is mainly based on the qualitative analysis method. In particular, the article discusses the legislative environment in Georgia and other issues related to debt management. Under the research, one of the notable point is that the government debt to GDP ratio experienced a particularly sharp increase in advanced economies. In particular, the ratio of the total government debt to total GDP of the advanced economies increased by 19 percentage points (pp) from 104% to 123% from 2019 to the end of 2020. As for the group of developing and middle-income countries, the indicator increased by 10 percentage points from 55% to 65% in the same period. According to current forecasts, in the medium term, the ratio of debt to GDP of developed countries is aimed at stabilization, although it is characterized by an increasing trend for developing countries. Substantially increased external debt is likely to put developing countries under significant fiscal pressure in the coming years. Like other countries, the pandemic had a significant impact on the economy of Georgia, and the fiscal policy took expansionary path. As a result, in 2020, government debt increased by 49% and reached 30 billion GEL (60.1% of GDP). The increased volume of government debt in Georgia and other countries makes the presence of effective mechanisms for its management crucial. The institutional foundations of public sector debt management in Georgia are basically determined by the "Law of Georgia on Public Debt", "Organic Law on Economic Freedom" and the decree of the Minister of Finance of Georgia "On Approving the Budget Classification of Georgia". Within the research, those main legislative documents were analyzed and three main issues were identified in terms of government debt management. Namely:
In addition to the shortcomings identified as a result of the analysis of the legislation, the "Debt Management Performance Assessment" (DeMPA) developed by the World Bank, which was conducted in Georgia for the first time in 2013, and again in 2020, provides important information regarding the effectiveness of the government's debt management mechanisms. In th DeMPA 2020 assessment, the following challenging issues were identified:
Analysis of the deficiencies identified in the DeMPA assessment, by its nature, indicates significant deficiencies in the debt management mechanism. The detailed research of these issues is the next stage of the given research and its logical continuation.
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