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GEORGIA | PUBLIC EXPENDITURE REVIEW

cally provided on these savings, with the contributions not subject to income tax until they are withdrawn at retirement age. Earlier withdrawals, while possible, can be discouraged with large tax penalties. The difference between mandatory savings programs and voluntary savings with automatic enrollment becomes quite small, particularly in countries with large informal sectors.

TSA

Targeting of the TSA program has improved considerably in the last years, but gaps remain in coverage. The TSA program supports the income of about 10 percent of the population - 454,000 beneficiaries living in 150,000 families as of end 2013. Georgia’s targeting approach is fairly good and effective at excluding those that should not benefit from the TSA program. In fact, 45 percent of the benefits reach the poorest decile and an additional 18 percent goes to the next decile of poorest families. The leakage of resources is low relative to other countries, with only 6 percent of the funds leaking to the richest three deciles of the population. The issue with the TSA program in Georgia is related to its relatively low coverage. Estimates show that about 300,000 individuals who may qualify do not receive the benefits. As shown in Figure S.6, both the number of registered applicants and the actual beneficiaries barely changed in the last 18 months. Currently, only one person out of four registered people receive the TSA benefit. At an absolute poverty rate of 17.7 percent, about 730,000 Georgians are considered poor. While coverage is a function of the budget envelope, the MOLHSA is committed to revise the TSA mean tested formula to replace subjective parameters with more objective ones and improve coverage through even better targeting. The benefit increase in July 2013 has significant fiscal implications. As expected, in the first months since the implementation of the increase, the budget allocated to the TSA program doubled – increasing from the range of GEL10-12 million to approximately GEL23 million per month. Without any increase in the number of beneficiaries, the Government allocated GEL213 million by the end of 2013, about 70 million more than if the benefit level had remained unchanged. This difference represents 0.3 percent of Georgia’s 2013 GDP. In 2014 the fiscal cost of this measure implies an estimated additional 0.4 percent of the GDP. Three possible scenarios (0, 1, and 2) project the potential fiscal implications of the recent benefit increase in the TSA program from 2013 to 2016. All scenarios start with the average number of beneficiaries at 430,000, assume a constant absolute poverty rate of 17.7 percent, and apply the same estimated GDP levels

Figure S.6: TSA Coverage and Spending Per Beneficiary In million people, Spending per beneficiary in GEL

2,0

60

1,8 50

1,6 1,4

40

1,2 1,0

30

0,8 20

0,6 0,4

10

-

Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14

0,2

Registered applicants

TSA recipients

Source: SSA, staff calculations

20

Spending per beneficiary (r. axis)

-

Profile for World Bank in Europe & Central Asia

Public Expenditures in Georgia: Strategic Issues and Reform Agenda  

Volume 1: Main Report. To keep Georgia’s government finances on a sustainable path along with sustainable growth and job creation, this publ...

Public Expenditures in Georgia: Strategic Issues and Reform Agenda  

Volume 1: Main Report. To keep Georgia’s government finances on a sustainable path along with sustainable growth and job creation, this publ...