Inflationary Pressures Remain Persistent

October 2007 | Risk Summary

The Georgian government is proposing an increase in its defence budget for 2007 from $723mn to $855mn. It is hoped that the revised budget will allow for greater military reforms which will pave the way towards NATO accession. This would represent a key strategic political victory in the government's efforts to strengthen ties with the EU and US. That said, greater military strength and the prospect of joining NATO is likely to aggravate already strained relations with Russia, which may lead to greater uncertainty over the stability of future energy supplies.

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