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Use of state resources in pre-election period continues by pension increase

ISFED's Blog
Based on the draft Law about 2016 State Budget of Georgia, teacher compensations and pensions will be increased ahead of the October 2016 parliamentary elections. 

On November 27, 2015, Prime Minister of Georgia Irakli Gharibashvili declared that state budget of 2016 “will focus on social issues”, while increase of teachers’ salaries in April will be coupled by increase of minimal monthly pension by 20 GEL starting from July 1, 2016.  

The government’s decision came after the UNM’s calls to cut bureaucratic expenses and increase minimal monthly pension by 50 GEL. Statements previously made by government representatives suggested that in light of the economic situation in the country, the government was not planning to increase minimal pension. Deputy Finance Minister said in early October: “We don’t believe that social expenses should be burdened by new obligations simply because with current Georgian economy it is impossible to do so.” Therefore, initial draft of 2016 budget submitted to the parliament did not envisage pension increase for the next year; however, revised draft later submitted to the parliament featured corresponding expenses. 

According to the chairmen of the parliamentary health committee, Dimitri Khundadze the pension increase has nothing to do with the upcoming elections and PR; however, projects planned for the next year suggest that the government’s political agenda is now focused on increase of pensions and teacher salaries, which can be viewed as an attempt to win over large groups of people during the pre-election period. 

With its sudden decision to increase pensions, the government continues the practice of increasing the number of social projects during pre-election period and boosting budget resources for such projects. For instance, based on the 2012 state budget the ruling United National Movement party started increasing pensions from September 1, a month before the elections. In particular, from September 1, 2012, monthly pension of 100 GEL was increased to 110 GEL for women aged 60-67 and men aged 65-57, and to 125 GEL for women and men aged 67 or more. In addition, ahead of the parliamentary elections the government announced about state programs that aimed to win hearts of large groups of voters and did not contribute to the long-term economic and social development of the country – e.g. Summer Job student’s employment program, Students’ Festival and others. 

World Bank’s 2013 Report on pension reforms worldwide and in Georgia highlights that pensioners are usually considered one of the most consistent and active voters and consequently, to win their hearts governments often take such decisions which bring short term political benefits but are economically unsubstantiated. One of the risks associated with pension policy is exploitation of pension issue by the government and other political groups to gain political support. As a result, governments often establish pension rates or increase existing pensions without any prior deliberations or identification of funding sources. 

Notably, one of the most important challenges that the Georgian state is currently facing is provision of dignified compensation for teachers, adequate pensions for the elderly and social assistance for the socially vulnerable. Because of the sensitive nature of the issue, as the election year approaches any increase of pensions and salaries as well as initiation of social projects in the state budget must be preceded discussions and subsequent decisions must be reinforced by economic calculations, in order to dispel any suspicions about abuse to win hearts of voters and advance pre-election objectives of the ruling party. 

Therefore, the fact that the government has planned the next year’s budget in a way that will increase income for large groups of electorate can be viewed as a political decisions serving to advance the pre-election campaign, which violates international standards that prohibit abuse of public resources.