Summary

The article analyzes Georgia's external debt structure (15.5 billion USD) and payment schedule. Special attention is paid to the private sector external debt that is 11 billion US dollars (including state guarantees) and its share significantly exceeds the amount of state debt.

According to the National Bank of Georgia (NBG), despite the large amount of foreign debt in 2012 - 2015, its services did not have any major problem for the Georgian economy.  At the same time, the sharp devaluation of the lari took place - from 1 USD = 1.65 GEL, up to 1 USD = 2,45 GEL (as of May 1, 2017). Devaluation reached its maximum in November 2016, when 1 USD was equal to 2,8175 Lari(source: Bloomberg data).

According to the NBG's argument, regardless of the large amount of payments as practice shows, the payment is partially (about half) covered by providing goods and services and issuing new bonds (prolongation). The National Bank of Georgia considers that the course of the inflow and outflow of foreign exchange funds in the country, is better to be guided not by the "External Debt Schedule" (which is a benchmark) but with a PaymentBalance of the Country, that gives incoming and outflow streams according to various economic activities for a certain period of time.

As of figures of 2016, the situation is getting worse in 2017. Overall, the amount of foreign debt payable in 2016 was just 4,780 billion US dollars and constituted 34% of Gross Domestic Product. Regrettably, in 2017 the situation is still unfavorable.

In April 2017, the National Bank of Georgia issued a new schedule for foreign debts by 2017. The burden of external debt of commercial banks and private companies operating in private sector in the current year is 3.8 billion US dollars (including: 3.15 billion US dollars, and the interest payable on it - 673 million USD).

Furthermore, the so-called article "Immediate" amounts reached 875 million US Dollars (including: 750 million USD, and interest - 125 million USD). Article "Immediately" includes such obligations that are already overdue and the service on them should be completed by January 1, 2017, but was delayed.

As of October 1, 2016, the article "Immediately" amounted to $ 735 million. In the fourth quarter of 2016, this amount increased by 140 million dollars. It should be noted that an important part of the article "Immediate" - 508 million US Dollars (or 60%) referred to banking sector.

Taking into consideration this "immediate" article, the total foreign debt of Georgia which should be paid in 2017 is 4.7 billion US dollars (out of this amount principal is 3.9 billion US dollars and interest is 800 million). If we add this figure to the amount of state external debt portion of 2017- $ 400 million - we receive $ 5.1 billion of external debt payments.

It is important that the Government of Georgia has reached the World Bank program renewal. The IMF's promises $ 285 million in loan debt (which is of particular importance) but not enough to cover the ongoing payment of 4.7 billion USD. Services on this amount of foreign debt can also be considered as an important burden for the currency market.

In such a situation it is important to find out a number of issues:

- What has accumulated and increased the article "Immediate" and reached 875 mln dollars.

- Is there a plan developed with commercial banks whether the National Bank intends to maintain stability on the currency market, especially regarding delayed foreign debt under article  "immediate".

- It is especially important if the Government of Georgia offers universal program of loans to consumers and businesses to soften the ongoing external debt situation (Larization program).

We believe that carrying out subsidizing the exchange rate in the conditions of budgetary profits achieved by the fiscal discipline is quite realistic and has good prerequisites for success.