What is the Difference Between ADB and EU Loans?

What is the Difference Between ADB and EU Loans?

access_time2021-10-07 11:50:27

"In the current year, the government will not borrow a cent," Georgia’s Prime Minister Irakli Gharibashvili said in the summer as the government decided to refuse the EU concessional loan aiming to support  judicial reform in the country.

The authorities were not ready for a reform and refused the loan, but the official reason was that Georgia had managed  to overcome the pandemic crisis and did not need additional debts.

But still according to the 2021 budget, Georgia’s  external debt will grow by GEL 3.5 billion by the end of the year and will reach GEL 32 billion.

 

On September 21, the Georgian government signed a contract for a $ 100 million loan with the Asian Development Bank (ADB) to strengthen the electricity transmission sector.

 


It turns out that the country doesn’t need 75 million euros from the EU but  $ 100 million from the Asian Development Bank will not be redundant despite the interest rate of the EU loan was 2 times lower than that of the Asian Bank.

 

The government and the ruling party officials are trying to exclude  any connection with politics saying that the  loan agreement with the Asian Development Bank was reached back in 2019.


“Starting from 2019, we were supposed to receive a total of about $ 2 billion, but it was decided not to take out part of the loans as the country is recovering from  the pandemic faster than expected. Thanks to this, we reduced
 the debt-to-GDP ratio from  dangerous 60% to 54%. It’s wrong to think that the future of Georgia depends on a single loan from the EU, ” Irakli Zarkua, the ruling party MP, says.
 

Expert Paata Sheshelidze sees  the only difference, because of which the EU loan turned out to be unnecessary unlike  the EBRD  loan.

 

“The EU is a political organization and  its financial support requires  the fulfillment of certain obligations by Georgia, in particular,  the judicial reform. The Asian Development Bank (ADB) , on the contrary, is a purely economic institution that gives loans for specific projects and does not bind borrowers with any political obligations. This is the reason of why the EU loan was refused although the amount is almost the same, and the interest of the EU loan is 2 times lower, ”he points out.

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