Roman Gotsiridze: “The Government of Georgia delivered (lent) nearly GEL 3 billion of national resource to the commercial banks.”

Roman Gotsiridze: “The Government of Georgia delivered (lent) nearly GEL 3 billion of national resource to the commercial banks.”

Roman Gotsiridze: “The Government of Georgia delivered (lent) nearly GEL 3 billion of national resource to the commercial banks.”

The FINANCIAL -- Verdict: FactCheck concludes that Roman Gotsiridze’s statement is HALF TRUE.

Resume: In 2014-2015, part of state budget funds(in total GEL 272.8 million), accumulated in the form of domestic debt was “lent” to the commercial banks by issuing bonds. Expediency of that decision raises certain questions. In the following years, the program was discontinued, which indicates that the Government acknowledged inexpediency of the aforementioned program. Therefore, MP’s criticism in that part of his statement is legitimate, albeit the figures are bloated.

In another part of his statement, the MP refers to start of depositing state budget balance at the commercial banks. That process was launched in July 2017. As of 2018, GEL 850 million is deposited at the commercial banks’ accounts. It is unclear why the decision of State Treasury to use free funds for getting profit should be viewed in a negative context. At the same time, statement that the banks “are forced” to lend these funds is also vague. Budget funds are deposited after having an auction and it is not mandatory for the banks to take part in auction.

The third part of Roman Gotsiridze’s statement is about the difference between the volume of refinancing loans provided by the National Bank of Georgia to the commercial banks in 2016 and in 2018. As of the first six months of 2018, the average amount of refinancing loans is GEL 1,007 million, whilst that figure was GEL 710 million in the first six months of 2016. At the same time, the maximum amount of refinancing loans was GEL 1,260 million instead of GEL 2 billion as stated by the MP. Of note is that that whilst comparing figures of 2016 and 2018 the MP gives lesser figure for 2016 and substantially bloats the figure of 2018. This comparison lacks objective ground given the different economic situations in 2016 and 2018.

Analysis:

MP of the Parliament of Georgia, Roman Gotsiridze, stated: “Khaduri gave GEL 300 million to the banks. You gave them GEL 1 billion of budget balance. You accumulate domestic debt and give funds to the commercial banks. The amount of refinancing loans was GEL 200 million two years ago and the National Bank has increased them up to GEL 2 billion. Nearly GEL 3 billion of national resources was allocated to the commercial banks. The latter are forced to either provide expensive loans to the Government of Georgia or lend to the people. After that you state there is a problem of excessive debt.”

In 2014, the Government of Georgia initiated “Economy Long Term Supply Programme”, which envisioned that part of funds from accumulated state debt has to be deposited at the commercial banks through issuing bonds. This practice was kept for only two years and GEL 172.8 million and GEL 99.99 million treasury bonds of different maturity were issued respectively in 2014 and 2015. Total amount of budget funds deposited in the commercial banks for the aforementioned purpose was GEL 272.8 million by the end of 2015 and decreased to GEL 135 mln as for 2018. Of note is that justification of the program expediency was vague and the achievement of stated goal was dubious. The Government of Georgia most likely acknowledged these factors, which is proved by its decision to discontinue that programme.

In regard to depositing state budget balance to the commercial banks’ accounts, since July 2017, as part of the state finance management reform, in order to increase efficiency of state finance management and get additional income, State Treasury started to deposit free available funds at the commercial banks. Budget funds are deposited at the commercial banks’ accounts as a result of auction, for the duration of three months and interest rates are accrued at those deposits.

Table 1: Budget Funds Deposited at the Commercial Banks (GEL Million)

Source: State Treasury of the Ministry of Finance

As illustrated by the table, amount of funds, deposited by the State Treasury at the commercial banks concomitantly (in a single period of time) has been increasing for the entire period and as of 2018 equals GEL 850 million. Total turnover of funds deposited at commercial banks’ accounts amounted GEL 920 million and GEL 2,185 million respectively in 2017 and 2018.

In regard to the volume of refinancing loans in 2016-2018, throughout 2016 average volume of refinancing loans was GEL 857 million, whilst that figure reached GEL 1,166 billion in 2017. As of six months of 2018, average volume of refinancing loans is GEL 1,007 million, whilst the same figure in the same period of 2016 was GEL 710 million. In regard to figures named by the MP of necessary note is that whilst the minimum amount of refinancing loans was GEL 250 million in 2016, refinancing loans have never reached to GEL 2 billion mark. As of 2018, the highest amount of refinancing loans (GEL 1,260 million) was registered on 4 January 2018, whilst the highest amount of refinancing loans in 2017 was GEL 1,632 million, which was registered on 19 April 2017.

Graph 1: Amount of Refinancing Loans in 2016 (red line) and 2018 (blue line)

Source: National Bank of Georgia

Of additional note is that whilst comparing the two periods, the MP on the one hand takes the lowest figure of 2016 and decreases it even further in his statement and on the other hand, he names another figure for 2018 which is 1.6 times higher as compared to the actual highest figure registered in 2018. Given the different economic situations in 2016 and 2018 the aforementioned comparison lacks objective ground, whilst factors affecting the volumes of refinancing loans are quite volatile even in short-term periods, let alone two years long time span.