Draft law on state budget for 2015 conforms to the medium term tasks defined by government fiscal policy. In particular, draft law envisages substantial increase in funding for prioritized sectors. Namely, funding for regional development, infrastructure and tourism will be increased by 176 million GEL; accessible health care and social security- 160 million GEL; education, science and professional training programs-86 million GEL; Agriculture - 70 million GEL; Also draft law on state budget for 2015 envisages increase both in operational and overall balance and decrease in fiscal balance compared to the planned values approved in the current state budget law.
State Budget Receipts for 2015
- Forecasts on macroeconomic variables for years 2014 and 2015 based on "Basic Data and Directions for 2015 -2018" (BDD) document which is enclosed to the draft budget law are consistent with the forecasts from alternative sources.
- In comparison with the current state budget law Draft Law on State Budget for 2015 envisages increase in state budget receipts by 465 million GEL (5.1%) mainly influenced by incurrence of the components of revenues by 771 million GEL (10.5%). However, with regard to incurrence of liabilities (both internal and external) total budgetary receipts are projected to decline by 306 million GEL. Based on the Draft Law on State Budget for 2015, disposal of nonfinancial (privatization) and financial (revenues gained from covered loans) assets amounts to 80 and 70 million GEL, respectively.
- As for the tax revenue estimates envisaged by the draft budget law for 2015, total amount for 2015 is increased by 11.4% over 2014 year. However, in order to properly examine presented projections, analysis should not only focus on approved plan for 2014 but also recent mobilization trends for 9 months. Based on previous years' mobilization trends and extrapolation method, PBO projects increase in tax revenues for 2015 by 6.9% that can be deemed as realistic. However, it is worth to evaluate dynamics of the components of tax revenues. Namely, compared to the expected figures for current year draft budget law for 2015 envisages increase in profit tax by 12.0% that needs further justification. Conversely, with the assessment made by the PBO, draft budget law projections of VAT and revenue tax is based on conservative view for mobilization.
- In order to properly evaluate planned value of tax revenues, PBO calculated independent projected tax revenues based on various official macroeconomic forecasts. In particular, projections were calculated based on three different scenarios of tax mobilization (see the proper part of the inference). Based on the mobilization tendency for 9 month comparison of forecasted parameters of 2015 to the parameters of the draft budget shows the same tendency that was referred in above mentioned assessment. In particular, the total amount of tax revenues that PBO calculated it at a level of 7 847 million GEL for 2015 that exceeds to planed annual value approved by budget law by 1.5%. Forecasted measures for single types of taxes are shown in the coresponding part of the inference.
- The following report presents sensitivity analysis of tax revenues. In particular, how the change of projected macroeconomic aggregates will affect the tax revenues. Based on PBO's assessment, 1 % positive deviation of real GDP growth rate and inflation (independently) will result in 2.4% positive deviation of total tax revenues from its planned amount, while 0.5% positive deviation will result-1.5-2.0%, respectively. Even 1% negative deviation of real GDP growth rate and inflation rate will result positive deviation of tax revenues by 0.7% from planned values approved by the state budget law, while 0.5% negative deviation will result-1.1%, respectively. So, the above mentioned indicates once again that the conservative plan of the total tax revenues is represented by the Draft Law.
- According to the represented draft budget law, projected amount of other revenues in 2015 will decrease by 80 million GEL related in particular, to the reduction of revenues from dividends by 50 million GEL. It is worth to consider that execution level of dividends are determined by 0.3% for 9 month 2014. Herewith, based on the information of the Ministry of Finance, the commission session for review and decision-making purposes of the distribution and usage of the net profit of enterprises operating with state shares.
State budget expenditures for 2015
- Draft law on the state budget for 2015 envisages increase in total budget expenditures by 440 million GEL (5%). Analysis of the components of budget expenditures reveals that expenses (current expenses) and acquisition of nonfinancial assets (capital expenses) will increase by 6% and 16%, respectively. Acquisition of financial assets (loans and stocks/shares rise) will increase by 69 million GEL.
- Based on the draft law on state budget for 2015 increase in assignments are determined for 27 spending agencies (among them, 5 new spending agencies) with respect to the plan envisaged in the state budget law of 2014. decrease in assignments are determined for 4 spending agencies, the same amount of assignment envisaged in the state budget law of 2014 are determined for 16 spending agencies.
- In line with the draft law on state budget for 2015 expenditures of general state importance totally amount 2 011 million GEL, that is less than planed value of the current state budget by 64 million GEL and less than the planed value in the first Draft Law by 21 million GEL. In comparison with the first version of the draft budget law the difference is mainly related to the reduction of the planned fund of the government by 20 million GEL – the reserve fund of the government, as well as the in 2014 budget law, is defined by 50 million GEL. Regarding to the expenditures of general state importance there were not changes in comparison with the first version of draft law. The diminishing trend is mainly a response to the reduction of service and repayment of external liabilities by 175 million GEL. Transfers to the autonomous republics and local authorities increases by 58.1 million GEL that exceeds the planned value of the current year. Similarly, fund of projects implemented in regions of Georgia is determined by 300 million GEL that exceeds to the planned volume of the current year by 50 million GEL. However, it is worth to mention that there are no percentage limits among the programs of the expenditures of general state importance.
Dynamics of liabilities of State Budget
- Draft law on State Budget 2015 envisages receipts from incurrence of liabilities for 2015 at the level of 1 330 million GEL, that is less than the current year plan by 18.7%, that is mainly related to the reduction of revenues of domestic liabilities component (securities, except for the stocks) and external liabilities by 200 million GEL and 106 million GEL, respectively. Draft law on the state budget 2015 envisages decrease in reduction component of liabilities by 189 million GEL that is influenced by the reduction of covering of external liabilities.
- As for the trend of domestic liabilities, the draft budget law envisages the reduction of revenues by 400 million GEL from the incurrence of domestic liabilities (securities, besides stocks). The mentioned trend is mainly related to the fact that, comparing to the state budget 2014 the draft budget law doesn't envisage the usage of treasury bonds and liabilities with amount of 200 million GEL for ensuring economy by long-term resources. Based on the existing practice of accounting, envisaged net incurrence of domestic liabilities at the level of 400 million GEL implies increase in domestic state liabilities by 897 million GEL from the issuance of treasury obligations and liabilities, and repayment for 497 million GEL. As for the service and repayment of domestic liabilities, this component increases by 46 million GEL for 2015 in comparison with the planned value approved in current year's state budget law.
- Based on the draft budget law, public debt as a % of GDP is increased from 34.7 to 35.7%. However, slight change is envisaged in the structure of public debt. In particular, external debt as a % of GDP decreases from 27.2 % to 26.8%. (Read complete document in Georgian)