Georgia Public Expenditure Review 2012
increase in non-financial assets by a significant margin, because of capital expenditures funded through capital transfers and acquisition of financial assets. It also shows that taking account of this component of capital expenditure significantly alters the overall functional composition.
Box 4.2. A More Comprehensive Estimate of State Budget-Funded Capital Expenditure
The figures on the left half of the table below give the functional breakdown of increase in non-financial assets as recorded in budget execution data for 2009–2011. These figures include both project and non-project expenditures. Specific projects and related annual expenditures are listed in the annual budget as a level within the organizational classification. From these listings and by cross-tabulating against expenditure on nonfinancial assets, it is possible to identify those projects that will not have been counted as adding to the central government’s non-financial assets. Combining expenditures for these projects with the values that form the basis for the figures in the left half of the table below, yields an estimate of total capital expenditure funded through the State Budget. These estimates are given in the right half of the table together with the functional breakdown. Table 1. Estimates of Total Capital Expenditure and its Functional Distribution in percent of GDP, except where noted
Function
General public services
Defense
Public order and safety Economic affairs of which
Transport (mainly Roads)
Energy
Other
Environmental protection
Housing and community amenities Health
Recreation, culture and religion
Education
Social Protection
Increase in Non-Financial Assets Estimated Total Capital Expenditure 2009 Actual 2010 Actual 2011 Actual 2009 Actual 2010 Actual 2011 Actual 9.2 11.7 9.9 6.8 8.6 6.9 15.9
9.2
19.9
13.1
36.9
45.6
43.1 0.1
6.1 1.3
0.1
2.0
2.8
3.1
2.7
55.0 0.5
8.9 0.2
0.0
4.3
2.4
3.5
0.7
6.4 9.3
60.3
46.5 1.3
12.5 1.0
0.0
5.0
1.3
6.5
0.4
11.8 14.8
43.3
28.5
6.8 9.7
60.2
34.7
4.5 6.5
60.9
34.8
5.6
13.7
15.6
14.4
6.6
11.3
9.1
0.9
1.5
2.1
2.3
2.0
11.4 0.1
3.2
1.8
2.6
0.5
10.6 0.7
3.5
0.9
4.5
0.3
Total
100.0
100.0
100.0
100.0
100.0
100.0
Total (GEL million)
907.1
1,020.3
1,039.1
1,219.8
1,382.9
1,483.8
Source: Georgian authorities and WB staff estimates.
These are approximate estimates only because some projects will probably have been missed and because some project costs include elements of ‘non-capital’ expenditures. The figures are nevertheless revealing. They show that capital expenditure is significantly higher than is indicated by looking at the figure for increase in nonfinancial assets alone, by over 40% in 2011. They also show that the functional breakdown of expenditure is badly distorted by looking narrowly at the increase in non-financial assets: in the bigger picture, Energy and Housing & Community Affairs (which includes water supply) are much more important, representing 16% and 11% of total spending in 2011, compared to a negligible contribution from the narrower perspective. By contrast, Transport becomes significantly less important.
66 | Chapter 4. Capital Budgeting Systems