This presentation was made by Natia GULUA, Ministry of Finance, Georgia, at the 14th CESEE SBO meeting held in Zagreb, Croatia, on 24-25 May 2018.

1. MINISTRY OF FINANCE OF GEORGIA
PFM reforms and Budget Transparency in Georgia
Achievements and Way Forward
14th Annual Meeting of Senior Officials from CESEE SBO
Zagreb, Croatia
24-25 May, 2018
Natia Gulua
Deputy Head of Budget Department –
Head of Budget Policy Division
E-mail: n.gulua@mof.ge

2. Content
 Public Finance Management Reform of Georgia;
 Budget Planning cycle;
 Fiscal Rules;
 Medium-term Planning – Basic Data and Direction (BDD) document;
 Annual Budget structure;
 Performance Budgeting – Planning and Reporting;
 Linking Strategies and Action Plans to the Budget and BDD;
 E-PFMS – E-Budget; E-Treasury – E-DMS;
 Fiscal Transparency – Citizen’s Guide of Budget;
 Open Budget Index 2006 – 2017 (availability of 8 key Budget Documents);
 Challenges and Steps forward

3. Public Finance Management (PFM) Reform
2007
•MTEF - Basic Data and Directions document (BDD Document) strengthened
2008
•GFSM 2001 Classification is Operational
2009
•New Budget Code approved
•Program Budget Piloted
2010
•Program Budget Piloted
•E-Budget Designed and piloted
2011
•E-Budget is integrated with E-Treasury
•Program Budget Piloted and BDD Coverage extended
2012
•Program Budget on State Budget Level Introduced
•Reporting on LEPL revenue integrated in ePFMS
•PIFC reform started
2013
•Program Budget on Municipal Level Introduced
2014
•Organic Low on “Economic Freedom” introduced
•Fiscal Governance Practice of Georgia and EU standards reviewed and action plan developed
2015
•All budget organizations (Including Local Government) are fully integrated in the System of Treasury Accounts and ePFMS
•Mid-term Action Plan Methodology developed and piloted
•2016 State Budget Citizen’s Guide Published
•FMC reform introduced

4. Public Finance Management (PFM) Reform
2016
•State Budget package expands coverage of performance related data and information
•Mid-term costed Action Plans are introduced in all line Ministries
•Public Investment Management (PIM) Reform - PIM Guideline and Methodology was adopted
2017
•Public Discussions on Fiscal Governance and Fiscal Discipline
•Public Investment Management system Piloted
•PEFA Self-Assessment prepared;
•FTE and Fiscal Rules report prepared by IMF
•2016 State Budget Annual Report extends coverage of Performance related data
2018
•PIMA Assessment;
•MTBF – coverage of information for BDD preparation process is increased;
 PFM coordination Council is operational which involves Parliament, MOF, State Audit Office,
Public Procurement Agency, Civil Society and Donor organizations. The council is in charge
of approving PFM reform mid-term strategy and annual action plans and performance
reports;
 Georgia has been supported by the International Donor organizations on this road, not only
financially but with the technical expertise. This plays the vital role in the capacity building
process and ensuring that the reforms go into the right direction.

5. Budget Planning
Establishment
of priorities
by Ministries
(March-April)
Agreement
of priorities
and budget
parameters
with the
Parliament
(By June 1)
Approval
of Medium-
term action
plans
by Ministries
(By June 30)
BDD
document
preparation
and approval
of ceilings
(By July 10)
Filling
the budget
Proposals
(By September 1)
Budget
Drafting to
the
parliament
(October
1,November
5, November
30)
Parliament approves
the Law on Annual
Budget no later than
third Friday of
December each year

6. Existing Fiscal Rules
The ratio of the sum of the
consolidated budget expenses
and increase of non-financial
assets to GDP
shall not exceed 30%
• Expenditure Rule
Share of the
consolidated budget
deficit to GDP
shall not exceed 3%
• Balance Rule
Share of
State debt to
GDP shall be no
more than 60%
• Debt Rule
Organic Law
prohibits increase
of any type of
taxes, except excise
• Revenue Rule
• Fiscal Rules in Georgia:

7. Basic Data and Direction (BDD) - structure
BDDI – Government
Program
II – Macro-fiscal
Parameters
III – Last Two
years execution
IV – Current Year
Forecast
V – 9 month
execution of
current year
VI – Next 4 year
forecast
VII- staff and
expenditure ceilings
for spending units
and Budget
Priorities
VIII – Ceilings
Broken down with
programs
including own
revenues
IX – Priorities
of
Municipalities

8. Annual Budget Structure (chapters)
Budget
I – Main
Parameters
(Balance) of the
state
budget
II – State
budget
revenues
III-The state
Georgian
budget
expenditures,
non-financial assets
and their functional
classification
IV-The state
budget balance,
financial assets
and liabilities
V - Budget
priorities and
programs
VI - state
budget
allocations
VII – Transfers
allocated to
Autonomous
republics and
Municipalities
VIII-Regulatory
Norms
IX-Final
Provisions

9. Annual Budget Structure (Annexes)
 Basic Data and Direction (BDD) document;
 Basic macroeconomic and financial indicators (baseline, optimistic and pessimistic scenario);
 Performance Budgeting Annex;
 Capital Projects Annex;
 Central Budget allocations;
 Analysis of fiscal sector macroeconomic risks (2017-2021);
 Fiscal risks;
 Forecast reconciliation;
 Information about State Debt;
 Debt Sustainability Analyses (2018-2021);
 Information (Matrix) on considering State Audit Office and Parliament Recommendations;
 Information about Legal Entities of Public Laws (LEPLs) including state budget funds and own
revenues.

10. Performance Based Budgeting – Planning and Reporting
First phase of implementation of Performance Budgeting:
• In 2009 – 3 Pilot Ministries prepared performance budgeting in addition to traditional budget proposals;
• In 2010 – 5 pilot line ministries;
In 2010 program budget methodology adopted by the Minister of Finance of Georgia
Second Phase:
 Since 2012 all state budget organizations prepared budget in the format of Performance Budgeting
according to the Methodology;
 Since 2013 local governments prepared budget in the format of Performance Budgeting.
Third phase:
• In 2015 program budget methodology updated for the state budget introducing broader indicator system
(baseline and target indicators, possible deviation and possible risks) and detailed medium term action plans
that would be prepared by the line ministries since 2016; as well as the methodology regulates the process
of preparation the performance budgets in the framework on working groups (all responsible
managers/”policy makers”, experts and MOF representatives;
Annual Reporting:
• All spending units have to prepare annual reports in the performance budget format, describing achived
outputs and outcomes against the planned ones and if there are some discrepancies to explain why they
could not achieve the planned outputs and outcomes;

11. eBudget and ePFMS
E-Budget – designed and introduced in 2011
• Since 2015 covers all Budget Organizations including local budgets (municipalities);
• Has Different modules for planning Revenue, Expenditure, using deposits as special module
for management;
• Is harmonized with eDMS (Debt Management module) to provide information on Donor
Financing (Grants and Credits);
• Budget Planning, Adjustment and Amendment operations are fully integrated in the e-budget
system;
• Harmonized with E-Treasury and commitments are made in E-Treasury within quarter
allocation plans defined within the E-Budget;
• Has Instruments of Reporting both dynamic and static;
• Users are allowed in the system through E-passport and different Roles can be assigned
based on the responsibility of the user; Review Mode is also available.

12. Linking Strategies and Action Plans with BDD and
Annual Budget Law
Government
programme
“FREEDOM,
RAPID
DEVELOPMENT,
PROSPERITY”
Basic Data and
Direction (BDD)
document
Medium-Term
Action Plans of
Line Ministries
Annual Budget
Detailed
Action
Plans
Aggregate
Framework
Role of MOF and the
Administration of
Government of Georgia

13. Budget Transparency
 The report on Fiscal Governance (“Fiscal Governance in Georgia and it’s Compatibility with EU Practice”) was prepared and published on the MOF
web-site both in Georgian and in English.
 Public Awareness Arising Discussions on Fiscal Governance were organized with support of EU in Tbilisi and in the regions (Batumi, Kutaisi, Rustavi,
Borjomi).
 Online Survey on the MOF web-site
 Started to publish budget documentation in a machine readable format in 2018
 Fiscal Transparency Evaluation was prepared with support IMF TA in 2017. Based on an assessment
Of fiscal transparency practices against the IMF’s Fiscal Transparency Code, Georgia meets the standard
of good or advanced practice on 18 of the 36 principles, and the basic standard on a further 10 principles

14. Open Budget Index - Georgia 2006-2017
34
53 55 55
66
82
0
10
20
30
40
50
60
70
80
90
2006
Minimal Transparency
2008
Limited Tranparency
2010
Limited Tranparency
2012
Limited Tranparency
2015
Substantial
Transparency
2017
Extensive Transparency

15. Open Budget Index - Georgia 2017
81 - 100
Extenstive
61 - 80
Substantial
41 - 60
Limited
21 - 40
Minimal
0 - 20
Scant or None
5
22
42
20
27
Georgia ranked 5th out of 115 countries with the score 82
New Zealand South Africa Switzerland Norvey Georgia
89 89
87
85
82

16. Open Budget Index 2015 - 2017
Open Budget Index 2015 - 66
Public Participation
46
Budget Oversight
73 100
Open Budget Index 2017 - 82
Public Participation
22
Budget Oversight
74
(Overall average score – 25)
(Overall average score – 12)
2017 average score - 45
.

17. Georgia - Open Budget Survey 2006-2017

18. Open Budget Survey - 8 key Budget Document
Document 2015 2017
Pre-Budget Statement (Basic Data and Direction Document)
Executive's Budget Proposal
Enacted Budget
Citizen's Budget
In-Year Reports
Mid-Year Review
Year-End Report
Audit Report
 All budget documentation MOF provides is available on the MOF website, including
abovementioned;
 Very important issue is that comprehensiveness of information increases year by year and
the practice is improving;
 All kind of reports provided with support of different development partners are always
attached with action plans and we have very straightforward agenda in the process of
improving PFM system in the country.

19. Challenges and Steps Forward
• MTBF system strengthened;
• Longer Term Forecasting – Based on good practice of MTEF long term projection and
forecasting is introduced.
• Civil Engagement - Effective Instruments for Civil Engagement are in place;
• Public Investment Management (PIM) System – gradually implementation in all
municipalities and spending units;
• Fiscal Discipline – Existing Fiscal Rules reviewed with IMF TA support and respectfully
updated;
• Performance Based Budgeting and Program Efficiency Check System;

20. THANK YOU