Transcript Vision of Reforms

Donor’s Conference 16-17 June 2004
Ministry of Finance
Establishment of financial order
and
Action Plan in the fiscal area
Macro-economic performance 2003
The 2003 performance shows mixed picture:




Growth of GDP: 8.6% (in real terms)
Inflation increased to 7%
Balance of Payments deficit deteriorated by 2%
US$ 51 million arrears accumulated
Medium-term macro-economic policy
Focus on:

Strong financial and monetary adjustment

Agreement with IMF on new 3-year program: 4 June 2004

Debt-rescheduling: Paris Club meeting scheduled for July
Macro-economic outlook
Our macro-economic policy is projected to
result in:

Forecast growth of real GDP: 6% in 2004, 5% in 2005-2008

Likely realization of GDP growth: 10%

Inflation kept at the level of 5%
Government Revenues: planned
2004 Budget:


Increase of tax revenues by 25% (i.e. 2.0% of GDP),
reaching 16.3% of GDP
Due to:
 Economic growth
 Financial policy measures in 2004
 Ongoing reforms in tax/customs, anti-corruption
 Normalization situation in Adjara
Planned 2005-2008:

Sustainable increase of government tax revenues by 1% in
each consecutive year
Government Revenues: realised

First 5 months 2004 revenues:
 14%
higher than planned in 2004 Budget
 35% higher than in comparable period in 2003

Better performance due to:
 Improved
administration
 Legalisation of imports

Expectation whole year 2005:
 Increase
of GDP
of revenues by another 1.2%, reaching 17.5%
Government Expenditures: 2004
Priorities for 2004:
•
•
•
Social sector
Rehabilitation of energy
sector
Reduction of domestic
arrears
Government Expenditures, 2001-2004
2500
21
20,5
20
19,5
19
18,5
18
17,5
17
16,5
2000
1500
1000
500
0
2001
2002
in million GEL
2003
2004
as percentage of gDP
%%

Government expenditures
will increase by 43%, to
20.6% of GDP
Million GEL

General Government Balance
Fiscal deficit:


Planned reduction to 1.6% of GDP
Expected reduction to 1.0% GDP
Clearance of arrears:
0
0
2001
2002

Planned reduction with 30%
Expected reduction with 45%
2004
-0,5
-1
-100
-1,5
-150
-2
-2,5
-200
-3
-250
-3,5
in million GEL

2003
-50
as percentage of GDP
%%

General Government Balance, 2001-2004
million GEL

Structural reforms in fiscal area
Mission Statement Ministry of Finance

Establishment of financial order, creation of a foundation
for stable economic growth, and the reduction of poverty

In order to fulfil Mission Statement: 6 areas of structural
reform have been identified:
Treasury, budget system, financial policy, tax department,
customs Department, and financial police
Structural reforms: treasury

Achieved already:
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
Commitment Control System established
Single Treasury Account created
Tax Refund procedures developed
 Remaining agenda:
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
Completion Single Treasury Account
Introduction International Accountants Standards
Structural reforms: budget system

Already achieved:
1
January 2004: new Budget System Law
effective
 Remaining agenda:
Improvement budget transparency
 Institutionalization of MTEF

Structural reforms: financial policy

Already achieved:
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Abolishment Tax for Economic Activities and Road
User Tax
New Tax Code and new Tax Administration code have
been prepared
New Customs Code has been prepared
 Remaining agenda:
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New Tax Code, effective 01.01.2005
New Customs Code, effective 01.01.2005
Structural Reforms: Tax Department

Already achieved:
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Large Tax-payers Inspectorate strengthened
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Excise Taxpayer’s Inspection was established
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Optimalization of the number of Inspections
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From June 2004 Adjara has been integrated into the
national tax administration structure
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Attestation of staff started
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Downsizing of staff (156 employees)
Structural Reforms: Customs
Department

Already achieved:
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Re-organisation: now only 4 Regional Customs
Divisions
Reduction of customs posts on the borders with
Azerbaijan and Russia has started
The status of Tbilisi Airport and Poti Port customs
posts has been upgraded and 24-hours regime
introduced

Escort of transit non-excise goods has been abolished
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Downsizing of staff with 25%
Structural reforms: Financial Police

Already achieved:
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Creation of Financial Police under Ministry of Finance
(March 2004)
Investigative functions fiscal and economic crime in one
single ministry
Target 510 staff; presently 60%
3 months operational: successful, a.o. in reduction
smuggling
 Remaining agenda:
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
Improvement organization
Training and equipping of staff