Doctor of Economics Irakli Makalatia suggests that in 2025 the government will try to compensate for suspended grants and EU funding at the expense of domestic debt.
Makalatia explains to Commersant that within current government policy and the increased funding of the public sector,
Georgia is unlikely to take foreign debt. That’s why, the Ministry of Finance will issue shares and bonds to the market that will boost inflation.
"In 2025, our economic growth forecast at 5-6% is quite low.
If we look at the state budget, we will see that salaries in the public sector are further growing. Against the background when a decrease in finances from the West, a decline in business activity and a further increase in government spending are expected, it will obviously be necessary to replenish the budget. Where should the government replenish the budget from? Almost all ways of obtaining external debt have been cut off and will probably be compensated by internal debt.
In 2025, the government will try to compensate the budget by increasing the domestic debt that directly affects inflation.
In short, the Ministry of Finance will release its bonds on the market, commercial banks will buy them, with this money the government will pay its financial obligations, in return, commercial banks will face liquidity problems, that is, the real indicators of money will decrease and the government will have to issue additional money when issuing new loans that will definitely lead to inflation in the country.
Such an economic situation and high inflation will affect the exchange rate and will put upward pressure on imports," Irakli Makalatia said in an interview with Commersant.
