Georgia – The Public Sector Balance Sheet
The New Zealand government currently owns thirteen state-owned enterprises (SOEs). The Georgian government on the other hand owns approximately 160 SOEs with a further 70-plus owned by local government. Over the last year, TDB director Phil Barry has had the opportunity to work on behalf of the International Monetary Fund (IMF), analysing the performance and risk exposure of these Georgian enterprises.
Focusing on seven of the country’s largest SOE’s, this project involved modelling the impact of a range of potential economic shocks on each SOE. The analysis indicates that with high levels of debt (over 75% of total assets on average), and with the debt largely denominated in foreign currencies, the SOEs – and their owner the government – are highly exposed to an exchange rate depreciation. While an adverse GDP or interest rate shock would also impact on the SOEs, exchange rate fluctuation is by far the main risk the SOEs face going forward. Another exchange rate shock equivalent to the 30% depreciation that Georgia experienced in 2015 would have an adverse impact on the government’s finances equal to around 5% of Georgia’s GDP.
Find out the details in the Georgian Government’s Statement of Fiscal Risks, as tabled in the Parliament, with our main analysis from page 24-50.