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Georgia

Georgia

Debt statistics 2017

Overall international debt burden (% of GDP)142
Government payments on foreign debt (% of revenue)22.7
Government foreign debt (% of GDP)35
Private foreign debt (% of GDP)163
IMF and World Bank debt cancellation ($ billions)0
Country case studiesYes

Country case study

Georgia became independent in 1991, and like other parts of the former USSR, saw its economy collapse with the sudden transition from a planned to radical free market economy. In per person terms, the economy shrank by 70 per cent between 1990 and 1994. By 1994, national income was just $520 per person.[1]

The Georgian government at independence did not owe any foreign debt. But with the economic collapse, public external debt rapidly increased to almost 50 per cent of national income by 1999. Georgia was not considered for the Heavily Indebted Poor Countries initiative because although it had been impoverished, its debt was considered payable by the IMF and World Bank. Foreign debt payments by the government averaged the equivalent of 20 per cent of government revenue between 1997 and 2006. But after 2003 these payments and economic growth finally began to significantly reduce the government’s foreign debt, from 40 per cent of national income in 2003 to 15 per cent by 2007. Foreign debt payments were down to 5 per cent of government revenue in 2007 and 2008.

In the mid-2000s the economy boomed, growing by an average annual rate of 10 per cent between 2003 and 2007. National income per person reached $2,300 by 2007. However, inequality increased. Between 1996 and 2008, the poorest 20 per cent saw their share of national income fall from 6 per cent to 5 per cent, whilst the richest 20 per cent increased their share of national income from 44 per cent to 47 per cent.[2] More dramatically, the percentage of the population living on less than $1 a day increased from 5 per cent in 1996 to 15 per cent by 2008.[3]

During this ‘boom’ a large amount of foreign private finance was lent and bought assets in the country. By 2008, foreign debt owed by the private sector was estimated to be double that of the public sector.[4]

In August 2008, Georgia went to war with Russia over the separatist regions of South Ossetia and Abkhazia. Around 500 military and civilians were killed on all sides. At the same time, Georgia was being impacted by the global financial crisis. Net foreign direct investment fell rapidly, whilst profits taken out of the country by multinational companies, and payments on privately owed foreign loans increased. The net private financial flows into Georgia fell from 16 per cent of GDP in 2006 to 7 per cent in 2007, and 2 per cent in 2010; dramatic changes with profound implications.

The country re-entered a financial crisis, with the economy growing by only 2 per cent in 2008, then contracting by 4 per cent in 2009. The government’s foreign debt again rapidly increased; the IMF and World Bank estimated it would be back to 43 per cent of national income by 2011.[5] Borrowing was low from 2000 to 2007 but has boomed since the war and financial crisis, rising from around $100 million a year from 2000 to 2007, to $900 million a year in 2008 to 2010. The large private sector debt has effectively helped to create a financial crisis which has resulted in the government’s foreign debt once again reaching high levels.

Debt payments for the whole of Georgian society are predicted to average 26 per cent of exports over 2011 to 2015; two-thirds of this is payments by the private sector and one-third by the government. Government foreign debt payments are predicted to be the equivalent of 12 per cent of government revenue from 2011 to 2015.[6]


[1] Calculated from World Bank. Global Development Finance database.

[2] Calculated from World Bank. World Development Indicators database.

[4] Calculated from World Bank. Global Development Finance database.

[5] IMF and World Bank. (2010). Georgia: Public sector debt sustainability framework. IMF and World Bank. Washington DC. 24/06/10. http://www.imf.org/external/pubs/ft/scr/2010/cr10219.pdf#DSA

[6] IMF and World Bank. (2010). Georgia: Public sector debt sustainability framework. IMF and World Bank. Washington DC. 24/06/10. http://www.imf.org/external/pubs/ft/scr/2010/cr10219.pdf#DSA

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