Georgia’s fiscal management is considered stable, supported by strong public finance systems and fiscal rules, according to a new World Bank report titled "Georgia Public Finance Review: Fiscal Policy for Inclusive Growth." However, the report notes ongoing risks, particularly from state-owned enterprises (SOEs).
The analysis reviews Georgia’s fiscal policy framework and offers policy recommendations aimed at fostering inclusive growth, improving public services, and ensuring long-term sustainability. The report highlights opportunities to improve the efficiency of public spending in sectors such as education and infrastructure.
Recommendations are grouped into two main reform areas. The first area proposes a special tax reform package intended to further formalize the economy, encourage economic growth, and manage emissions more effectively. The second focuses on reforms in education to improve efficiency, quality, and equity in the system with the goal of enhancing human capital and supporting long-term productivity.
According to the World Bank report: “Fiscal Policy as a Driver of Inclusive Growth: Georgia’s fiscal system has a strong redistributive impact, significantly reducing poverty and inequality.”
The report also identifies emerging challenges that require proactive management. These include fiscal risks associated with SOEs, increased frequency of extreme weather events and natural disasters, and an aging population.
It recommends strengthening Georgia’s tax system by improving efficiency, progressivity, and sustainability. Suggestions include shifting the tax mix toward indirect taxes, addressing labor tax distortions, and enhancing taxation of property as well as negative externalities like carbon emissions.
In terms of education spending, the World Bank notes that Georgia could achieve educational outcomes comparable to those in the European Union by improving resource efficiency without increasing expenditure. The report states: “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 document is positioned as a key resource for policymakers and civil society organizations working toward advancing economic development in Georgia.