Prague, 11 August 2004 (RFE/RL) -- Addressing a cabinet meeting on 26 July, Prime Minister Zurab Zhvania said that in just nine months since the ouster of President Eduard Shevardnadze, Georgia's new government had already succeeded in stabilizing the country's depleted finances.
Zhvania said it marked the first time since the country regained independence in 1991 that, in the middle of the fiscal year, the government was asking parliament to increase the budget rather than reduce it.
Citing high budget revenues, the government is asking the legislature to increase public spending by nearly one-third, with a view to boosting the defense, security, and social sectors.
"I had the opportunity to take a closer look at some of these criminal cases, and I can say that most of them are sheer nonsense from a strictly procedural viewpoint."
But many in Georgia do not share the government's euphoria. Dismissing official statistics that claim recovery after more than a decade of steep decline, they say the planned budget increase is not founded on real economic growth.
Niko Orvelashvili, a senior analyst at the Tbilisi-based Georgian Economic Development Institute, tells RFE/RL he sees no reason to be optimistic: "I have serious doubts about these [official] figures. It is just smoke and mirrors. It is a public relations operation that is founded on nothing concrete. How could the economy possibly grow when all serious businessmen are considering emigrating and when construction projects -- which are one of the best indicators of growth -- have all stopped?"
Tamar Khorbaladze is chief economic correspondent for the independent daily "24 Saati" (24 Hours). She says that contrary to what official statistics may suggest, cabinet ministers are well aware of the situation -- even though they remain optimistic: "[They] hope to increase budget revenues by continuing the policy that has been pursued up until now. That means they hope businessmen, scared by the [anticorruption] methods used by the government, will continue to pay their taxes until the end of the year. Also, [they] rely on potential revenues from the fight against contraband. Finally, there is the [upcoming] privatization."
On 15 July, the government released a list of more than 370 companies to be privatized within the next two years. It hopes the sell-off will generate some $30 million in cash within the next four months.
But Orvelashvili believes these expectations are far too high. He says a large number of enterprises due to be put to auction are unlikely to find buyers -- either because of their state of disrepair or because of the pervasive climate of insecurity within the business community.
Since Saakashvili succeeded Shevardnadze last January, the General-Prosecutor's Office has launched a nationwide crackdown on the shadow economy, ordering the arrest of dozens of alleged corrupt officials and tax evaders.
The government says this policy has brought substantial results, compelling officials to declare their income and private entrepreneurs to pay their taxes.
Yet, representatives of the nongovernmental sector question the methods used by the government to collect budget revenues, arguing some of them are barely legal.
Even before Saakashvili's election, many former officials of the Shevardnadze administration were arrested on suspicion of embezzlement, tax evasion, and other fraudulent activities.
But none of them was brought to court and most were released after spending three months in custody.
They also had to pay fines -- running into the millions of dollars -- to compensate for losses they allegedly caused the state budget. But Orvelashvili says the legality of the government's methods is disputable: "It would be more appropriate to talk about state racket. I had the opportunity to take a closer look at some of these criminal cases, and I can say that most of them are sheer nonsense from a strictly procedural viewpoint. In most cases, the prosecution didn't even get close to proving the guilt of these former officials."
Among those arrested was Shevardnadze's son-in-law, Gia Jokhtaberidze, who had to pay some $15 million for his release even though the financial loss he had allegedly caused the state was officially estimated to be just $350,000.
Another prominent detainee was former railway chief Akaki Chkhaidze, who paid $3 million, a sum that far exceeds the amount he is accused of having embezzled. Former parliamentarian Bondo Shalikiani was released last month after paying $140,000 and handing shares in various businesses to the government.
Lawyer Davit Usupashvili tells RFE/RL he has serious concerns about the government's methods of extracting money from officials it accuses of corruption: "Up until June, all money transfers made by people under investigation had no legal ground and law enforcement agencies were giving contradictory justifications in this respect. On the one hand, prosecutors were saying these transfers were being made in case a court would later find the state had suffered financial loss because of these people. This implied these sums did not yet belong to the state and would be returned should these people eventually be found not guilty. On the other hand, both the finance minister and prime minister were saying this money had already been transferred to the state budget and that it would not be returned in any form, regardless of the court decisions."
The parliament recently voted to allow law enforcement agencies to confiscate private assets in instances when the owner cannot prove their legal origin.
In addition, Usupashvili says, the government has attempted to legalize questionable money transfers: "Last June, parliament voted to amend the criminal code. It now says a prosecutor can make a 'deal' with a detainee under which the latter accepts this form of sentence and voluntarily pays for the financial loss he allegedly brought the state -- even if he does not confess to being guilty. In any event, these 'deals' must be legalized in court. Therefore, these money transfers raise many legal concerns, even after the amendments voted in June."
Journalist Khorbaladze estimates that lump sums donated by suspected corrupt officials make up to one-half of this year's budget revenues.
But Georgian authorities deny allegations that the budget increase has been made possible only by contributions from wealthy detainees under investigation. They say improvements in tax collection and massive layoffs in the bloated public sector are mainly responsible for the better budget.