Overview of the Anti-Crisis Plan

News | Economics and Social Policy | Good Governance | Analysis 29 December 2020

IDFI, with the support of the European Union (EU), is implementing the project – “Monitoring Covid-19 related public spending and human rights protection during the state of emergency and in the pre-Covid-19 period”. One of the main goals of the project is to monitor the implementation of the Georgian Government’s Anti-Crisis Plan and the effectiveness of the state programs enacted within its framework. The following report provides an overview of the initial anti-crisis plan and its progress during the pandemic as of December 2020.

 

Due to the pandemic, the Georgian economy is expected to shrink by 6% this year, a historic low across the last 20 years.

 

The Government's timely involvement and enacting a well-designed, flexible anti-crisis plan is critical in mitigating the damage caused by the COVID-19 pandemic. The anti-crisis support package should aim to help the most important sectors of the economy and the most vulnerable people in times of crisis.

 

Countries have responded to this global threat in different ways. On 24 April of 2020, Georgia presented an initial anti-crisis plan with a cost of GEL 3.5 bln . The plan accounts for 7.2% of the expected GDP in 2020. It is divided into two main parts: assistance to citizens and assistance to business. The following sectors were the largest focus of the plan: tourism, agriculture, and development. The plan was focused on formal employees and self-employed persons. Additionally, the plan included various assistance programs for socially vulnerable households. We offer you a brief overview of this plan and relevant recommendations below.

 

Key Findings

 

- In 2020, the Georgian economy is expected to shrink by -6%. This comes behind the expected growth rates of developing countries and the world.

 

- The volume of the anti-crisis plan amounted to 7.2% of the expected GDP. The biggest part of the GEL 3.5 bln anti-crisis plan (30%) was allocated to direct assistance to citizens.

 

- One-third of the self-employed have received a GEL 300 assistance. As of November 2020, 249 thousand people have received a total of GEL 74.6 mln.

 

- Out of GEL 450 mln allocated for the “200 GEL assistance to the unemployed due to the pandemic program”, less than a third has been transferred. The assistance was received by 162,220 unique beneficiaries, to whom a total of GEL 129 mln was transferred. The program is scheduled to be renewed for a period of six months on January 1, 2021.

 

- “Utility subsidies” program costs have slightly exceeded the budget. The utility subsidies program’s costs amounted to GEL 173 mln and exceeded the allocated amount by GEL 3 mln. The program is scheduled to be prolonged for an additional four months.

 

- Compensation was provided to 925,000 children under 18. In total,GEL 185 mln has been spent on the program, which exceeded the allocated budget by GEL 160 mln (+16%). The assistance was identical (200-GEL) regardless of the social status of the child.

 

- Out of business sectors, the construction and the tourism sectors will receive the largest volume of assistance packages. The government has allocated them assistance packages of GEL 434 and GEL 200 mln, respectively.

 

- According to the updated anti-crisis plan, the government intends to continue subsidizing the economy in 2021. On November 27, the government announced an updated anti-crisis plan for 2021 that includes GEL 1.1 billion assistance to the population and businesses in almost equal amounts - GEL 545 and 515 mln, respectively.


 

Challenges of the Anti-Crisis Plan

 

The anti-crisis plan has alleviated the economic problems caused by the pandemic for the population and businesses. However, some assistance programs were presented in small volumes,  with it being entirely possible to increase the volume and target segment of these assistances, considering that the budgets of certain programs could not be utilized.

 

Additionally, inaccuracies were observed in the initial version of the anti-crisis plan, and even after the intermediary changes in the plan, certain programs have still exceeded their budget.

 

- The budget allocated for the assistance of self-employed is insufficient and prerequisites of the program have led to delayed assistance.

 

The program covered 29% of the self-employed, and due to the problems created with the proof of income documents, the budget allocated for the program could not be utilized on the initial stage.

 

- Assistance for children under 18 requires a more specific approach.

 

The assistance provided was identical to the amount for socially vulnerable families as well as for the high-income part of the population. It is also important to clarify why 800,000 children were originally earmarked for assistance.

 

- A monthly allowance of GEL 200 for employees who lost their jobs was insufficient and it was possible to increase the amount of assistance.

 

The amount of assistance slightly exceeds the already low subsistence level, which averages at GEL 192 in 10m 2020. Considering that even a third of the allocated budget could not be utilized, it was possible to increase the amount of the one-time transfer. Also, the criteria for differentiation of the self-employed for whom the one-time assistance is GEL 300 are unclear.

 

- The utility subsidies program was conducted on an unfair basis.

 

This program should have benefited the socially vulnerable and the low-income populations that have been affected by the pandemic the most. Utility vouchers are based on the volume of consumption and in many cases may not accomplish the purpose of the assistance. Vouchers can only be declined voluntarily by middle and high-income people through the opt-out system.

 

- Increasing the assistance to the poor and the disabled is plausible.

 

The amount spent on assistance programs for socially vulnerable families and people with disabilities exceeded the allocated budget, indicating a higher demand for assistance. Given that the pandemic has increased the number of vulnerable people, an increase in the budget for such programs is recommended. It is also desirable to increase the number of beneficiaries and include more people with disabilities.

 

- The elimination of the income tax on the GEL 750 transfer is a significant benefit for the low-income population.

 

This program is especially important for small businesses and its continuation would reduce pressure on the low-income population and small businesses during the post-pandemic period.

 

- The 2021 Anti-Crisis Plan envisages deferral of credit commitments for those whose economic activity was restricted in the period of December-January. However, it is unknown how credit deferrals will be carried out, and whether these credit obligations include only bank loans or other non-bank liabilities as well.

 

The government has not clarified the issue of interest expense; it will likely be redistributed to the borrower's payments in subsequent periods. Also, it is unclear whether this deferral policy only applies to bank loans or if it includes other types of liabilities.

 

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