Georgia’s National Debt – how Much Will the Country Borrow in the Next 3 Years and From Whom?
The government has developed and approved a debt management strategy. The creation of such a strategy supports the government of the country to identify risks, to assess and manage them, as well as to reduce the value of debt services and to ensure transparency of debt management processes.
Georgia developed the 2019-2021 strategy together with IMF and the World Bank.
Based on the status quo, at the end of 2018 (according to the preliminary data) the Government’s debt to GDP ratio in percentages was 42.1%, of which 34.2% were external debts. In the next three years this ratio will change as follows:
Government’s debt to GDP ratio:
2019 – 41.4%
2020 - 41.5%
2021 – 40.6%
Within the government’s debt portfolio, external debts make up a significant share - 81.3%. Large portions of the external debt, 88,1%, is debt attained from creditors, mainly on preferential terms. The second largest portion of the debt comes from the Eurobond, 9.5%, and the remaining part consists of ‘historical external debt’. As for the domestic debts, their 69.3% share is Treasury Bonds, 17.3% Treasury Bills, and 13.3% State Bonds.
According to the current state of affairs, by the end of 2018 35% of external debt of the government was denominated in SDR, 34% in US dollars, 27% in the EURO, and the remaining 4% in other currencies.
81.2% of the government debt is denominated in foreign currency, meaning that the depreciation of GEL against foreign currencies will negatively impact the significant portion of the government’s debt.
In 2019, 1,686.1 million GEL in funding is expected to be received from creditors. Among that funding is 1,301.1 million GEL for programme loans and 385 million GEL loan for supporting government reforms.
As it is known, Georgia has issued 500 million USD worth of Eurobonds, which have to be repaid by 2021. According to their strategy, the government will develop a plan throughout 2019 regarding repayment of the Eurobonds.
Since the largest portion of Georiga’s debt is made up of foreign currency, in order to reduce risks associated with the government’s debt portfolio monetary risks, a plan was drawn up so that by 2021 at least 20% of the government debt to be domestic loans and in the long term perspective that number should gradually increase to 35%.