Georgia: Tracking International Reconstruction Assistance

In the nine months since international donors agreed to give Georgia $4.5 billion in war-recovery aid, Tbilisi has taken in nearly half of that sum. These days, monitors are busy examining how Tbilisi is employing the funds. One international anti-corruption watchdog and a major American donor deem the government's performance adequate to date, but some monitors caution that tracing all the money is close to impossible.

The aid, intended to help Georgia rebuild after its 2008 war with Russia, ranges from the United States' $1 billion pledge to Malta's 10,000 euro (about $13,989) grant. [For background see the Eurasia Insight archive].

Direct budgetary support makes up less than a billion dollars of the total $4.5 billion aid pledge, according to data from the Ministry of Finance. But direct budgetary support is proving the most complicated aspect of the aid flow to follow.

Some donors, like the United States, supply stipulations about how part or all of the assistance funds should be used; others, like Ukraine, which transferred $10.4 million to Georgia, do not.

Budgetary support funds are channeled through the same government account as the rest of the state's revenues. That means that donors must rely on the government's own accounting mechanisms to know exactly how their funds are being used. The Georgian state budget will receive $370 million in grants over the first two phases of the three-year aid program and $275 million in loans.

Within the Georgian government, the Ministry of Finance and the Chamber of Control, which performs state audits, are designated with tracking how funds are used.

The Chamber of Control did not respond to requests for an interview. Deputy Finance Minister Dmitri Gvindadze, however, told EurasiaNet that the government can track roughly 90 percent of all aid money that enters Georgia, including budgetary support funds.

While Gvindadze claims that it is not possible to pick out individual donor transfers slotted for general budget support, the ministry can follow transfers to a particular government ministry or agency responsible for implementing an earmarked project. Donors can then check on the particular project to confirm that the funds were used as intended, he added.

"This money is never marked. It does not have a special watermark," Gvindadze said in reference to funds slotted for general budget support. "It is just a commitment on the Georgian side that you give me this money, I am going to do this because I can't do this without this money because my revenues are down."

He added that donors are not giving the government a "blank check;" most have requested detailed reforms, and have set terms before releasing money to the Georgian state budget.

Officials from the largest provider of budgetary support, the United States Agency for International Development (USAID), told EurasiaNet that they are "comfortable" with the level of transparency and accountability at the Ministry of Finance, which holds primary responsibility for allocation of war-recovery aid.

The officials, who asked not to be named, noted that the government's internal checks-and-balances had to be assessed before $250 million in USAID funds were transferred in December 2008. USAID specified that the budget support should be used for state pensions, state health care, assistance for Internally Displaced Persons, schools and for state employee salaries except for employees of the Ministry of Defense and Ministry of Internal Affairs.

USAID will hire an international auditing company to audit how the funds were used with participation by anti-corruption watchdog Transparency International.

A research team at Transparency International Georgia is already tracking the 12 largest aid donors, a list that includes international financial organizations like the World Bank and the bank's affiliated International Finance Corporation, as well as governments.

The diversity of donors and funding sources makes it nearly impossible to track all of the funds coming into the country, noted Eric Barrett, project manager for the watchdog's Making Aid Work For Georgia program. Funds from the United States alone come from dozens of different government agencies and departments, Barrett said. "In the aid world, it is called fragmentation and fragmentation tends to obscure and obfuscate the situation," he said. "However, . . . we can focus on specific things and follow up on them." [Editor's Note: Transparency International receives funding from the New York-based Open Society Institute. EurasiaNet.org operates under OSI's auspices].

Based on donor agreements with the Georgian government that Transparency International Georgia has been able to obtain, the aid flow shows no evident signs of problems, Barrett said. "We have not found any issues," he said.

Dr. George Welton, a Tbilisi-based researcher hired by the Open Society Georgia Foundation to look into government auditing mechanisms and aid pledges from international financial institutions, echoed that assessment. "I don't think there is any question about the transparency of the way this is being spent," Dr. Welton said. "We know where it is going, so big picture stuff is not a problem. There is not the level of audit oversight that one would like to see, but I don't think you can conclude from that that the money is being spent badly." [Editor's Note: The Open Society Georgia Foundation is part of the Soros Foundations Network. EurasiaNet.org, which operates under OSI auspices, is also part of the Soros Foundations Network].

The monitoring process has hit some snags. The Ministry of Internal Affairs, for example, denied that it carries responsibility for one of the aid projects, construction of IDP housing. Meanwhile, the World Food Programme declined to give out detailed information about its aid budget breakdown.