Fiscal management in Georgia is sound, underpinned by robust public finance systems and fiscal rules, but risks remain, particularly from state-owned enterprises (SOEs), according to the World Bank report, Georgia Public Finance Review: Fiscal Policy for Inclusive Growth.
The recommendations are structured around two critical reform pillars:
- The first is a special tax reform package, designed to achieve a triple dividend and promote further formalization in the economy, boosting economic growth, and managing emissions more responsibly.
- The second pillar focuses on education reforms, aimed at improving efficiency, quality, and equity in the education system to enhance human capital and support long-term productivity growth.
Key Messages:
- Fiscal Policy as a Driver of Inclusive Growth: Georgia’s fiscal system has a strong redistributive impact, significantly reducing poverty and inequality.
- Addressing Emerging Risks and Future Challenges: Fiscal risks from SOEs, increased instances of extreme weather and natural disasters, and an aging population are identified as growing challenges requiring proactive management.
- Strengthening the Tax System for Efficiency and Equity: While tax collection is robust, reforms are recommended to improve efficiency, progressivity, and sustainability, including shifting the tax mix toward indirect taxes, addressing labor tax distortions, and enhancing taxation of property and negative externalities such as carbon emissions.
- Optimizing Public Spending for Better Educational Outcomes: By improving the efficiency of its current education resources and better resource management, Georgia has the potential to achieve educational outcomes on par with those in the EU. According to the report, Georgia could increase learning-adjusted years of schooling by 20 percent without any additional spending. Recommendations include strengthening governance, improving access and quality in preschool and higher education, and optimizing resource allocation.
The report is a vital resource for policymakers, civil society organizations, and other stakeholders committed to advancing Georgia’s economic development and improving the well-being of its citizens.
