2014年-世界发展银行全球_Georgia_Public_Expenditure_Review___Strategic_Issues_and_Reform_Agenda_84页_2mb

Summary of Georgia Public Expenditure Review (Report No. 78143-GE)

Core Content

This report provides an in-depth analysis of Georgia's public expenditure system, focusing on key areas such as macro-fiscal policy, education, state-owned enterprises (SOEs), and intergovernmental fiscal relations. It aims to identify policy options to support sustainable fiscal management, growth, and job creation, while improving the efficiency and transparency of public spending.

Main Objectives

• To address macro-fiscal challenges and improve fiscal sustainability.
• To enhance the efficiency and effectiveness of public expenditures, particularly in education, health, and social protection.
• To strengthen the governance and fiscal performance of SOEs.
• To improve intergovernmental fiscal relations and local government capacity.

Key Findings and Main Points

1. Macro-Fiscal Challenges

• Georgia has experienced rapid growth (5.7% annually from 2010–2013) but remains challenged by high unemployment (15%).
• Fiscal policy played a crucial role in the post-crisis recovery, leading to an increase in the fiscal deficit and public debt.
• In 2013, the fiscal deficit was 2.6% of GDP, projected to rise to 3.7% in 2014 due to increased social expenditures.
• An aging population and the need for improved health outcomes will keep social expenditures high at over 9% of GDP in the medium term.
• The tax-to-GDP ratio is about 25%, which is relatively high and efficient compared to the ECA region, but constitutional limits on tax rate increases restrict further revenue growth.

2. Education Expenditures

• Education spending in Georgia is low relative to its income level and compared to other ECA countries.
• In 2012, education expenditures accounted for 2.9% of GDP, below most ECA countries.
• Despite a 47% real increase in education spending since 2006, the quality and effectiveness of education remain subpar.
• Georgia's PISA results in 2009 were below expectations for its income level, with a gap of approximately three years of schooling compared to OECD countries.
• Only 30–40% of 15-year-olds achieved Level II or above in PISA, indicating a need for improved educational attainment and performance.
• Teacher salaries are among the lowest in Georgia, but teacher and administrator pay constitutes a significant portion of education expenditures.

3. State-Owned Enterprises (SOEs)

• SOEs have a substantial impact on the fiscal position of the government.
• The government has not fully integrated SOEs' quasi-fiscal activities into the budget, leading to reduced transparency and limited fiscal oversight.
• SOEs have significant market risk exposures, and their performance affects the overall fiscal health of the country.
• The report recommends establishing a clear dividend policy, mainstreaming quasi-fiscal operations into the budget, and creating an inventory of SOEs to better understand their fiscal implications.

4. Intergovernmental Fiscal Relations

• Local governments (Subnational Governments – SNGs) face challenges in revenue generation and expenditure management.
• The equalization grant system is complex and needs simplification to better reflect the actual resource needs of local governments.
• The report suggests revising the formula for equalization grants and allowing local governments to share the tax base and set their own tax rates for certain taxes.
• Improving the transparency and reporting of subnational finances is critical to enhancing fiscal management.

Key Policy Recommendations

• Macro-Fiscal Policy:

  • Consolidate public expenditures and increase revenues at the sub-national level to reduce the fiscal deficit from 3.7% of GDP in 2014 to 2.5% in 2017.
  • Implement rule-based compensation policies for public employees and civil servants to contain salary and bonus increases.
  • Strengthen public investment management and external oversight to ensure efficient use of capital expenditures.

• Social Protection and Health:

  • Limit the medium-term growth of basic pension benefits to the rate of inflation.
  • Strengthen the capacity of the Social Service Agency (SSA) to manage the Universal Health Care (UHC) program.
  • Introduce a pharmaceutical component for UHC beneficiaries to cover non-emergency outpatient treatment, particularly for the lowest income groups.

• Education:

  • Improve service delivery by having the Ministry of Education and Science (MES) set and monitor quality standards.
  • Increase the number of working hours for teachers to align with OECD standards, which could lead to a reduction in the number of teachers but improve the salary scale and quality.
  • Expand preschool education by utilizing underutilized primary school facilities, training primary school teachers, and targeting disadvantaged children and ethnic minorities.
  • Encourage public-private partnerships in vocational education and training (VET) to enhance financing and delivery.
  • Reduce VET dropout rates through career guidance and better-informed choices for students.

• State-Owned Enterprises:

  • Establish an inventory of SOEs to better understand their fiscal impact.
  • Develop a clear and consistent dividend policy for SOEs.
  • Mainstream quasi-fiscal operations (e.g., subsidized utility services) into the budget to increase transparency and fiscal accountability.

• Intergovernmental Fiscal Relations:

  • Improve reporting of subnational finances to enhance transparency and management.
  • Simplify the equalization grant formula to better reflect the resource needs and expenditure patterns of local governments.
  • Remove the suspension of taxes on movable property and lower the income threshold for immovable property exemptions.
  • Allow local governments to share the tax base and set their own tax rates for certain taxes, while maintaining centralized administration.

Conclusion

The report highlights the need for a comprehensive reform agenda that addresses the inefficiencies and challenges in Georgia's public expenditure system. It emphasizes the importance of fiscal consolidation, improved public investment management, and enhanced governance structures across all levels of government to ensure long-term sustainability and effective resource allocation.