Even though Georgia’s foreign debt is not that big in theoretical terms, its growth pace is alarming. Georgia faces a big challenge despite the existing restrictions imposed by the Georgian Constitution, according to which the state debt shall not exceed 60% of the nation’s GDP. For the past several years the pace of growth of the debt has exceeded the GDP growth rate, which should lead the authorities to the decision to “tighten belts” and even “freeze the debt”, Nodar Khaduri, an economic expert, said on July 14 at a round table meeting on Georgia’s foreign debt as well as challenges and prospects of sustainable development. The meeting was held in the office of the Open Society Georgia Foundation (OSGF).
The meeting was organized by the Green Alternative Association and the OSGF as part of the Transparent Foreign Aid to Georgia Coalition and East-East: Partnerships Beyond Borders program.
Since 1995, debt indicators have been basically based on the data of the National Bank of Georgia, the Finance Ministry of Georgia and the International Monetary Fund. The discussions focused on the decision of international donors made after the August 2008 war to disburse to Georgia USD 4,5 billion, of which 2 billion would come as grant, while 2,5 billion as credit.
“The funds have plaid a significant role for Georgia and has helped the country to mitigate the impact of both the war and the global financial crisis”, said Nodar Khaduri.
Manana Kochladze and Irakli Macharashvili of Green Alternative reported on infrastructure projects and the Vaziani-Gombori-Telavi road construction project, which was financed by the credit and grant. The Vaziani-Telavi road construction project called for the repairs of the 27-km motorway, which links Tbilisi to the Kakheti region. Georgia was to receive USD 60 million in loan from the World Bank (WB) for the project, which called for the widening of the road and the construction of four new bridges.
The monitoring conducted by Transparent Foreign Aid to Georgia Coalition exposed serious procedural violations in the project preparation process. Green Alternative came up with recommendations and submitted them to the Roads Department and the WB. The organization, in particular, recommended not to widen the road sections in rural areas and to use asphalt technology rather than expensive concrete…
“Since this section of the Vaziani-Gombori road is the landslide zone, the concrete road cannot be the guarantee of protecting the road from landslides. Therefore we recommended that the state should use asphalt technology, which requires less funds for the construction and even in case of annual repairs”, said Manana Kochladze.
As a result of the efforts of Green Alternative, the WB has changed the decision. The credit for the changed project has been halved to USD 30 million from 60 million.
The presentations and the recommendations will be reviewed and a report will be prepared on Georgia’s foreign debt. The reports will be disseminated among donors, international (Azerbaijan, Ukraine) organizations and local non-governmental organizations.
