FISCAL TRANSPARENCY IN GEORGIA

UNCLAS TBILISI 000519

SIPDIS

STATE FOR EUR/CARC, EUR/ACE:MYOUTH, EUR/PGI TCUNNINGHAM AND
EEB/IFD/OMA:ASNOW, RFIGUROA
TREASURY FOR OIA

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EAID ECON PREL GG
SUBJECT: FISCAL TRANSPARENCY IN GEORGIA

REF: STATE 16737


1. (U) Pursuant to reftel request, Embassy Tbilisi submits the
following update of information on fiscal transparency in Georgia.


2. (SBU) Fiscal transparency in Georgia is much improved since the
Rose Revolution in 2004. The Law on Budgetary Systems (December 29,
2004, as amended) specifies in detail how the government's budget is
prepared, passed by the Parliament and administered by the Ministry
of Finance. Article 4 of the law requires all aspects of the
process, except classified information, to be open to the public and
the press. In practice, draft budgets under consideration by
Parliament and the final budget are available to the public on the
Internet website of the Ministry of Finance and in the official
register, the Legislative Messenger. Parliamentary debates on the
annual budget and occasional supplementary budgets, as well as the
terms of the resulting budget law, are widely reported in the local
media. The state budget includes all known revenues and
expenditures of the central government, including those of special
presidential funds for emergencies. Before 2007, these funds had
been extra-budgetary and had raised questions about their
transparency. The budget figures are generally considered
meaningful and accurate. The 2006 Open Budget Index prepared by the
International Budget Project (IBP) found that all the budget
documents it deemed important are available except for a "citizen's
budget". However, beginning in 2006, the Government has prepared an
annual "citizen's guide" to the budget and to government spending
priorities, expressed in layman's terms. The IBP report faults
Georgia for the amount of information supplied in the documents, but
its conclusions are based on data from 2005 and earlier and do not
include later developments. Ministries and other government
agencies provide significant but varying amounts of detail to the
public about the main directions and priorities of their spending.
Ministry of Defense and Ministry of Interior budgets are more
transparent than in the past. Clear rules have been adopted to
govern transfers from the central government to municipalities and
are in the process of being implemented. The U.S. Treasury
Department funds a U.S. citizen resident advisor in the Ministry of
Finance who provides advice that assists in ensuring transparency of
the budget. Georgia has reported to the IMF on its compliance with
standards and codes covering fiscal transparency, but those reports
are significantly out of date and refer to periods prior to the 2004
change of government.

PERRY