Page 39 - GEORptNov21

Georgians drowning in debt
The largest creditors of the state of Georgia are Asian Development Bank (ADB), World Bank International Development Association (IDA), European Investment Bank (EIB) and International Bank for Reconstruction and Development (IBRD).
The debt owed to IDA is GEL2.85bn ($935mn), the ADB debt stands at GEL4.36bn ($1.43bn) and the EIB debt is GEL1.88bn ($620mn). Gross external debt include both public sector (general government, public corporations and national bank) and private sector (banking and other sectors) external debt.
Over the last several years, Georgians have been sliding into debt.
Roughly 80% of Georgia’s households owed a collective $5.5bn (31% of GDP) on bank loans in 2018, the last year for which detailed figures are available from the National Bank. Unknown amounts are owed to subprime lenders. The figure puts Georgia towards the top of the list of European countries in terms of the amount of consumer loans relative to the size of the national economy, and significantly higher than neighbours Armenia and Azerbaijan.
While well-off households can take loans to improve their financial flexibility, an increasing amount of debt is being taken on by the poorest Georgians, for whom it can exacerbate their precarious situation, a 2018 World Bank study found.
In the richest European countries, such as France and Germany, banks do offer household loans at an average interest rate of 4%, while in Georgia it’s a steep 17%, according to National Bank data. Payday loan companies offer even higher interest rates in exchange for lax credit history checks, luring many Georgians into a debt trap.
Given the country’s meagre pensions, elderly Georgians – unless they are supported by their children – usually need to borrow money just for day-to-day expenses. About half of retired Georgians have bank loans. And the institution that has a virtual monopoly on the distribution of pensions, Liberty Bank, also charges a whopping 31% annual interest rate to borrowers on pensions. Because they have steady, albeit small, incomes, Georgians on pensions are often the only members of poor families who are eligible to get credit at all. That means they borrow on behalf of the entire family, as well as to pay for their own medication. On average, Georgian pensioners spend between 65 and 80 lari ($20-25) a month servicing debts, Mikheil Svanidze, a Tbilisi-based sociologist, told Eurasianet.
While debt had been a significant problem for financially vulnerable Georgians before 2020, with the arrival of the COVID-19 pandemic the country’s entrepreneurs were hit, as well.
39 GEORGIA Country Report November 2021 www.intellinews.com