Tbilisi (GBC) - Trade-offs Today for Transformation Tomorrow in Middle East and Central Asia Region – with this name, on October 19, the International Monetary Fund (IMF) held economic discussions over Middle East and Central Asia economies.

Aggregate debt is projected to rise from 86.8 percent of GDP in 2020 to 91.7 percent of GDP in 2021 and gradually decline between 2022 and 2026, returning to the pre-crisis level in 2023.

However, this decline masks divergent dynamics across countries over the medium term, with debt ratios projected to be higher than pre-pandemic levels in Armenia, Georgia, and Tunisia and lower in Egypt, Jordan, and Pakistan.

In 2019, Georgia’s state debt to GDP was 40%, while the figure rose to 60% in 2020. According to the IMF forecast, the figure will drop to 45% by 2026.

This is the lowest figure in Middle East and Central Asia, among developing markets and medium-income countries such as Georgia, Armenia, Jordan, Egypt, Tunis, Pakistan and Morocco. Moreover, Georgia’s indicator was lower than the indicators of the mentioned countries in 2019 and 2020.

The debt buildup in 2020 led to a significant rise in public gross financing needs, projected to hit $564 billion overall during 2021–22, about a 20-percent increase compared to 2018–19.

In addition, the increase in debt and contingent liabilities (stemming from off-budget measures like the provision of loans or guarantees, as well as many other forms of quasi-fiscal operations, including through state-owned enterprises) has weakened government balance sheets, threatening debt stabilization prospects.

According to the IMF, after shrinking due to the collapse in domestic demand and oil prices in 2020, the aggregate current account deficit is projected to widen from its 2020 level of 3.4 percent of GDP to 3.9 percent of GDP in 2022. This reflects the balance between a positive impact from the global recovery on merchandise exports, the impact of higher oil prices and domestic demand recovery on imports, and a slower recovery of travel and tourism (for example, Armenia, Azerbaijan, Georgia, Lebanon, and Morocco)

In early October, the parliament of Georgia started discussing the 2022 state budget bill, where Deputy Finance Minster Giorgi Kakauridze stressed the importance of cutting the government’s debt in relation to GDP and eradicating the budget deficit. As noted by Giorgi Kakauridze, the budget deficit must not be over 4.4%, while the state debt to GDP correlation will drop to 54% in 2021 and  to 52% in 2022.