Academic journal article Journal of Finance, Accounting and Management

Actual Aspects of State Foreign Debt Management Strategy of Georgia in Modern Stage

Academic journal article Journal of Finance, Accounting and Management

Actual Aspects of State Foreign Debt Management Strategy of Georgia in Modern Stage

Article excerpt

Introduction

The work has studied the correlation and structure tendencies of Georgia's domestic and foreign debt, increasing dynamics of foreign debt is analyzed and the reasons for the origin of specific debts are explained. Georgian resource deficit of foreign debt supplement characteristics according to the cost is also estimated. Foreign debts are grouped according to interest rate and according to the group base, there is concluded that 87, 3% of the foreign debt is a cheap monetary resource, only 12, 7% of total foreign debt represents more than 3% interest rate credit, the maximum indicator of which does not exceed 6%.

Parallel with the increase of foreign debt in Georgia, the estimation indicators of foreign debt increase in dynamics received at an international level are analyzed and on the bases of real data, it is concluded that the importance of indicators for developing countries are within limits set. The increasing level of foreign debt is not a threat to the country.

The work analyses the condition of foreign debt repayment and the country's ability of payment based on the foreign debt service index. Georgia, as a donor country for world financial institutions and countries, is considered as a reliable partner.

Conclusions made and goals set in the paper are important for working out the right strategy for foreign debt management.

Georgia is an ancient culture and civilization. Historical location, nature, people, script, culture and traditions and struggle for country's independence had been the subject of interest for the world. Increased number of foreign tourists can be used as a proof of the above-mentioned fact. In 2017, the number of international visitors exceeded 7,5 it was 18% more, than in 2016. 101 visitors come on 1square kilometer (including 20% of annexed territory by Russia), while the population is 54 people per 1square kilometer.

In 1990, Georgia managed to leave the Soviet Union and administrative command economy through struggle. It became an independent country. During the initial stage of the marketdriven economy building process, Georgian society faced challenges of vital importance. The first and main issue was to overcome economic backwardness and improve the standard of living. Transition to market economy gave a chance to Georgia to enter a globalization process and to become a member of a civilized world.

Economy

In fact, market-driven economy transition process was full of unforeseen problems. The main obstacle was to bridge the fiscal deficit. On the state level, external debts (credits) can be used as a source to cover resource deficit. The word debt, in this case, means to give credit from one party to another for some time-limit and repay it with some beneficial interest.

Public debt (credit) is a special form and experts give its following definitions:

* "At the given period, debt is the total amount of the deficits of past periods."

* "All the received credits by the state including their interest rate that is not covered yet, make public debt."

* "Public debt is the number of outstanding loans used by the state for the specific period of time." 1

According to the above given first definition, we can conclude, that public debt is the total amount of past period budget deficits. Though, we consider such approach to deficit not to be correct. It would be better to state, that: public debt is the sum of credits borrowed to cover past period budges and payment deficit of the country. The second definition is more precise, but it would be better to replace "make public debt" by the phrase "is the public debt for the specific moment". As for the third definition, it is quite brief. Public debt differs according to the budget type of the country. According to the Law of Georgia on Public Debt (taken on 12 June, 1998), public debt is "the total amount of domestic and external debts, expressed in the national currency, taken through agreements entered into by the Ministry of Finance of Georgia on behalf of Georgia and with guarantees provided by the Ministry of Finance by other bodies/institutions, also in amounts received from placement of government securities denominated in the national and foreign convertible currency by the Ministry of Finance of Georgia on behalf of Georgia and received from the financial resources approved by the International Monetary Fund for Georgia. …

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