The Ministry of Finance has published a fourth budget deficit
On March 19th, 2015 Transparency International Georgia published a study,which showed that the Ministry of Finance’s 2014 budget deficit was calculated incorrectly and GEL 82 million was deposited in the revenue reserve (tax refund) subaccount without justification.
After the study’s publication, the Ministry of Finance and the Deputy Minister, openly and in private conversation, demanded that Transparency International Georgia change and retract the information. Nonetheless, within 24 hours of our study’s publication, the Ministry of Finance published three different budget deficit figures. On March 19th, the deficit came down from 3.2% to 3.0%, while on March 20th, the deficit returned to 3.2%. Today, however, the Ministry’s budget deficit chart again changed for a fourth time to 2.95%, which is in line with our calculations. The fact that the MoF now has two different deficit figures on its website adds to the absurdity of the situation. Apart from this, the English language website puts the budget deficit at 3%, while the Georgian language website displays 3.2% .
Regarding the two deficit figures, the Deputy Finance Minister stated that there are two different ways to calculate the budget deficit. Bringing up this fact is another attempt by the Ministry of Finance to mislead the public, because the methodology set out in Government Finance Statistics Manual 1986 is the only methodology to calculate the consolidated budget’s deficit, as agreed on through the memorandum with the International Monetary Fund. Therefore, it is inconceivable that the Ministry of Finance believes the budget deficit can be calculated using two different methods with one agreed upon with international partners and one for internal use.
We would like to note that if the Ministry of Finance calculated the budget deficit using the Government Finance Statistics Manual 2001, it brings their statement under even greater suspicion, because the government has not used this method for calculating the budget deficit in almost ten years as per a recommendation from the IMF. If the Ministry of Finance started to use this methodology, the budget deficit would be less than 2% rather than 3.2% as claimed by the MoF.
We call on the Ministry of Finance to immediately revise the 2014 budget deficit figure downwards to 2.95% of GDP, and remove the misleading deficit data from their website. The World Bank agrees with Transparency International Georgia on the accuracy of the 2.95% figure. It is also important that the Ministry of Finance explain to the public why the 2014 budget deficit as given on their website changed three times over the course of the past several days. Apart from this, our question – why was the unprecedentedly large sum of GEL 82 million deposited on the revenue reserve (tax refund) subaccount when it could have been put to more effective use – remains unanswered.