Georgia’s foreign debt increases

Since the August Russian invasion Georgia’s foreign debts have increased quite quickly. According to November 2009 figures loans taken under state guarantee reached more than USD 3 billion. In the third quarter of 2009 Georgia’s foreign debt increased by USD 617 million. Of this USD 332.5 million is accounted for by the Government sector. The National Bank's foreign liabilities have increased in the same period by USD 280 million.

To cover its principal debts in 2010, before taking interest into account, Georgia will need USD 95 million, in 2011 - 121 million, in 2012 – 257 million and in 2013 – 371 million. The interest payments will also be huge: in 2010 USD 71 million, in 2011 - 70 million, in 2012 – 68 million and 2013 – 45 million.

Despite this huge external debt the Government plans to take on another GEL 1.3 billion in loans this year. Today Georgia’s foreign loans are 28% of GDP, acceptable according to international standards, but if this tendency continues it could become a very serious macroeconomic problem.

Economists say that the foreign debt is not dangerous if it increases more slowly than GDP. However Davit Narmania thinks that many of Georgia’s foreign loans have been spent in an unreasonable way. The country is still paying off debts taken on during the Shevardnadze regime. Commenting on the current loans, Narmania suggests that mostly they have been used to stabilise the economic situation in the country, a proper use for them.