Draft law on the state budget for 2015 conforms to the medium term tasks defined by government fiscal policy. In particular, draft budget law envisages substantial increase in funding for the following prioritized sectors: regional development, infrastructure and tourism-(201.6 million GEL); defense, public order and security (166.6 million GEL); accessible health care and social security (170 million GEL); education, science and training programs (141 million GEL); agriculture (72 million GEL).
State Budget Receipts
- Forecasts provide by third version of draft law on the state budget for 2015 does not differ from the initial version. Moreover, draft budget law encloses information about dynamics of fiscal aggregates that can be deemed positively.
- Draft Law on the State Budget for 2015 projection of total amount of budget receipts exceed to analogous indicator determined in the previous version of draft budget law by 305 million GEL (3.2%). Increase in receipts is projected to be driven by incurrence of liabilities and acquisition of nonfinancial assets. Accordingly, draft budget law envisages increase in state budget receipts by 770 million GEL (8.5%) over 2014.
- PBO projected total tax revenues at a level of 7,684 million GEL that exceeds to the planned value approved by draft budget law by 1.3%.
- Projections of tax revenues for 2015 provided by draft budget law for 2015(third version) is determined to 7,600 million GEL that conforms to the forecasts identified in previous version of draft budget law. Projected tax revenues exceed to annual plan for 2014 by 11.4%. Increase in tax revenues is projected to be driven by increase in excise and amendments to the tax legislation. However, to properly examine presented projections, analysis should not only focus on approved plan for 2014 but also recent mobilization trends. Based on existing execution trends and extrapolation method, PBO estimates tax revenues for the current year. PBO projects increase in tax revenues for 2015 by 9.9% that can be deemed as realistic. It is worth to evaluate dynamics of the components of tax revenues. Namely, draft budget law for 2015 envisages increase in profit tax by 12.6% that needs further justification. With the assessment made by PBO, by considering current trends, draft budget law projections of VAT and excise duties bases on conservative view.
- In order to properly evaluate planned value of tax revenues, PBO calculated projected tax revenues based on various macroeconomic forecasts. In particular, projections were calculated based on three different scenarios. According to the mobilization tendency for 10 month of 2014, PBO projected total tax revenues at a level of 7,664 million GEL that exceeds to the planned value approved by draft budget law by 0.5%. As for the components of tax revenues projection of profit tax does not deviate from planned volume approved by draft budget law. With regard to the amendments to the tax legislation, receipts received from tax revenues will increase by 110 million GEL. However, this value does not consider possible decline of demand as a result of increased prices.
- 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 1.3% positive deviation of tax revenue from its planned amount, while 0.5% positive deviation will result-0.9%, respectively. Negative deviation of real GDP growth rate and inflation rate(independently) by 1% will result negative deviation of tax revenue by 0.4-0.3%, while 0.5% negative deviation will result-0-0.1%, respectively.
- According to the draft budget law for 2015, projected amount of other revenues in 2015 will decrease by 80 million GEL and amounts 275.0 million GEL. In particular, revenues from fines and penalties are projected to decrease
State Budget Expenditures
- Total amount of expenditures as well as its components deviates from projections provided by second version of draft budget law for 2015. In particular, total amount of expenditures exceeds to projections of second version of draft budget law by 55 million GEL. Projected increase in expenditures is driven by acquisition of nonfinancial assets and repayment of liabilities. Based on the draft budget law for 2015, total amount of expenditures is determined to 495 million GEL that exceeds to the planned value for 2014 by 5.5%. With regard to expenses and acquisition of nonfinancial assets budget expenditures will increase by 6% and 16%, respectively. Acquisition of financial assets will increase by 89 million GEL
- In line with third version of draft law on state budget for 2015, general purpose of state expenses are not significantly changed from second version of draft budget law. However, with regard to service and repayment of external liabilities, the amount of general purpose of state expenses is increased by 15 million GEL.
Dynamics of Liabilities
- Draft budget law envisages receipts from incurrence of liabilities for 2015 at the level of 1,010 million GEL that exceeds to analogous indicator provided by second version of draft budget law by 80 million GEL (8.6%). Analogously, with regard to change of exchange rate (1USD=1,80GEL), repayment of external liabilities is increased by 10 million GEL.
- Based on the draft budget law public debt as a % of GDP is increased from 34.7% to 37.2%. However, external debt (% of GDP) is characterized by decreasing trend, while domestic debt (% of GDP) increases.
- Draft budget law for 2015 envisages net increase in incurrence of domestic liabilities by 600 million GEL