Georgia’s External Debt: Trends, Comparisons, and Future Outlook

External debt is a vital tool for economic development, enabling countries to secure financial resources for large-scale projects that cannot be funded through domestic budgets alone. However, while external debt offers opportunities, excessive reliance on it can threaten a nation’s financial stability and long-term growth.

As of September 2024, Georgia’s external public debt stands at $9.033 billion (approximately GEL 24.658 billion), reflecting an increase of $580.7 million compared to the same period in 2023. A year earlier, the figure was $8.452 billion (GEL 22.639 billion), marking a noticeable year-over-year rise in the country’s external debt. The bulk of this debt is owed to multilateral creditors, amounting to $6.538 billion, followed by bilateral creditors with $1.609 billion. Additionally, the National Bank of Georgia has external obligations totaling $385.8 million.

Georgia’s primary creditors include the Asian Development Bank (ADB), the World Bank (IBRD and IDA), and the European Investment Bank (EIB). The ADB is Georgia’s largest lender, with $2.361 billion in loans, followed by the World Bank ($1.658 billion) and the EIB ($1.149 billion). Among bilateral creditors, Georgia owes the most to France ($814.5 million), Germany ($617.6 million), and Japan ($131.8 million).

Analyzing Georgia’s external debt in a regional context provides valuable insights into the broader financial stability and economic policies of neighboring countries. Azerbaijan, for instance, maintains relatively low external debt, supported by substantial revenues from its oil and gas sector. External debt in Azerbaijan constitutes about 20% of GDP, indicating strong financial resilience and minimal reliance on foreign creditors. Armenia, on the other hand, has an external debt of approximately $8 billion, accounting for about 50% of its GDP. This high dependency on external financing poses challenges for Armenia’s economic stability and growth. Turkey faces even greater complexities, with external debt equivalent to about 40% of GDP. In recent years, Turkey has struggled with currency depreciation and rising inflation, making debt management a critical challenge for its economy.

Georgia’s external debt is characterized by a diversified structure, combining multilateral and bilateral loans. Multilateral creditors, such as the Asian Development Bank and the World Bank, provide financial support for infrastructure, social, and economic development projects. These funds are used for constructing roads, schools, hospitals, and energy infrastructure. The primary driver of debt growth in 2024 was the need to finance large-scale infrastructure projects aimed at fostering economic growth and improving transport networks.

Globally, the scale of external debt varies significantly across countries, depending on the size and development level of their economies. For example, the United States has the largest external debt globally, amounting to trillions of dollars and far exceeding its GDP. Japan also carries a substantial debt burden, but it is primarily held by domestic investors, making its management relatively less risky. In the European Union, countries like Greece and Italy grapple with high levels of external debt, making their economies particularly vulnerable during crises. Such nations often rely on EU assistance to manage debt servicing and avert financial collapses.

Georgia’s external debt growth reflects both the opportunities and challenges of economic development. While the debt increased by $580.7 million over the past year, it remains manageable and is primarily directed toward funding critical infrastructure and social projects. With sound policies and continued cooperation with international creditors, Georgia has the potential to enhance its economic performance and financial stability. Effective debt management and a long-term vision will enable the country to tackle current economic challenges and maintain a sustainable financial future.