Caspian Business Journal

Saakashvili’s Economic Liberty Act Meets Mixed Response In Tbilisi

President Mikheil Saakashvili’s proposed Economic Liberty Act, which outlines measures for the further liberalization of the Georgian economy, has been furiously debated in Tbilisi this week. As The Georgian Times reports, the act aims to cap government spending and scrap bureaucratic hurdles, making the country “a flagship of the world’s liberal economies.” According to Bloomburg, the IMF has come out strongly in favour of the measures. Edward Gardner, the IMF’s senior resident representative in Georgia, has stated that the act, “will reinforce the government’s credibility and have a positive impact on investment.”

While the plans for liberalization have received support from some quarters, including Teimuraz Tsurtsumia, Deputy Chairman of the Economy and Economic Policy Committee of Parliament, a number of local experts have reported concerns.

Davit Narmania, the head of the Young Economists Association, a Tbilisi-based think tank has criticized the act on account of the need for constitutional changes: “Well, in economically developed countries the percentage of budget deficit in GDP is maximum 3 percent. But in a time of global economic crisis in Georgia the tax income decreased and we received international aid which increased the budget deficit over 9 percent,” Narmania told, Georgian Business Week. “By the new initiative in the future we will have to say no to international aid.”

It has also been pointed out on the Georgia Media Centre blog how reports show that IMF “is currently scheduled to run a fiscal deficit of 4.7% of GDP in 2012, and 3.5% and 3.4% in the two subsequent years: all despite proposing to spend around 1 billion Georgian Lari (GEL) less in 2012 than in 2009 at constant prices.”

The move comes amid speculation about the future of the Georgian economy. The World Bank and International Finance Corporation’s Doing Business 2010 ranked Georgia 11th out of 183 countries, an improvement of  5 places from the previous year. The government, meanwhile, forecasts a contraction of 1.5 percent in 2009 and 2 percent growth in 2010.