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In brief – public external debt management and dynamics in Georgia
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Sustainability of the external public debt situation has been one of Georgia’s key sovereign credit strengths, also acknowledged by the two rating agencies – Standard and Poor’s and Fitch – with which Georgia has been recently working. This sustainability has been achieved through years of managing external debt in a pragmatic and conservative manner, also through allocating proceeds of the borrowing in a forward-looking way, in line with the national development and investment priorities.
Georgia’s external public borrowing today is primarily viewed as the source of procuring additional external financing – chiefly on concessional terms - for addressing infrastructure concerns and other development bottlenecks in Georgia.
The Ministry of Finance of Georgia is the only state entity which is authorized to negotiate loans with foreign governments and regional and international financial institutions. In 2008, this ministry has been also in charge of the issuance of the debut Eurobond for Georgia – the transaction which has created a strong Georgia benchmark in the international capital markets, achieved great distribution diversity and successfully introduced the country to a large number of fixed-income investors.
Charts 1-5 show various elements of Georgia’s external debt dynamics in 2000-2008
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Chart 1 breaks down Georgia’s public external debt by creditors. The World Bank is by far the largest creditor providing Georgia with highly concessional funding on IDA terms.
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Chart 2 depicts share of bilateral and multilateral public external debt in Georgia’s overall external public debt stock. The share of multilateral public external debt incurred on prevailingly concessional terms has been increasing incrementally through the recent years, reaching almost 70% of the overall public external debt stock by 2008.
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Chart 3 depicts the ratio of external public debt service to exports and to budget revenues which has been declining due to mainly longer-term amortization schedules for Georgia’s public external debt and rapid growth of the budget revenues and of Georgia’s export capacity.
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Chart 4 suggests that the ratio of Georgia’s external public debt stock to GDP follows steep downward trajectory as a result of rapid real and nominal GDP growth in Georgia and relative appreciation of the Georgian Lari vis-à-vis USD.
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Driven by the same logic, ratios of external public debt stock to exports and to budget revenues–shown in chart 5 - have been also on decline through the recent years, contributing to the resilience of the economy of Georgia.
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