Georgia’s foreign debt growing rapidly

Georgian’s foreign debt is around USD 2.7 billion, and since the Russian aggression in August it has increased by almost USD 600 million. Analysts predict that by the end of 2009 it will be more than USD 3 billion. The accumulation of foreign debt started during the Shevardnadze period but it has been growing since the Rose Revolution as well.

The authorities believe that it is not the size of the foreign debt which is important but its relation to GDP. International economic standards decree that foreign debt should not exceed 60% of GDP. In Georgia the situation in this regard is encouraging, as despite the increase in foreign debt its relation to GDP is decreasing. In 2003 foreign debt was 44.9% of GDP, in 2007 it was 16.8%.

These figures prove that the situation is improving, however independent economic experts challenge the official figures. They think that Georgia’s foreign debt is worth 25% of GDP. Foreign debt increased in 2008 in particular. In the spring USD 500 million credit was taken for issuing Eurobonds, but the opposition suspects this money was used in the election campaign.

The Russian invasion has made the situation even more dramatic. USD 4.5 billion has been promised to Georgia as financial assistance. The country has received USD 600 million already and a further USD 400 million is awaited. Finance Minister Nika Gilauri thinks that USD 2.8 billion will be received by Georgia over the next 2-3 years.