Via IMF (Den Internationale Valutafond)

IMF Executive Board Completes the Fifth Review of the Extended Arrangement under the Extended Fund Facility for Georgia







December 17, 2019











  • Georgia’s economy has been resilient in the face of negative shocks, with solid growth and a lower current account deficit.
  • Advancing financial sector and structural reforms would make the economy more resilient to shocks and sustain medium-term growth.
  • The extension of the IMF program will help the authorities to maintain policy discipline and to advance structural reforms to promote higher and more inclusive growth.

On December 17, the Executive Board of the International Monetary Fund
(IMF) completed the Fifth Review of Georgia’s economic reform program
supported by a three-year extended arrangement under the Extended Fund
Facility (EFF). The completion of the review will release SDR 30 million
(about $41.4 million), bringing total disbursements under the arrangement
to SDR 180 million (about $248.7 million).

In completing the review, the Executive Board also approved the
authorities’ request for waivers of nonobservance for the performance
criteria on the ceilings on the augmented general government deficit and
ceiling on the cash deficit of the Partnership Fund.

The Executive Board has also approved the extension of the arrangement by
one year until April 11, 2021 and rephase access accordingly. The extended
arrangement for SDR 210.4 million (100 percent of quota) was approved by
the Executive Board on April 12, 2017 (see

Press Release No. 17/130

).

Following the Executive Board discussion, Mr. Tao Zhang, Deputy Managing
Director and Acting Chair, said:

“Georgia’s economy has been resilient in the face of negative shocks, with
solid growth and a lower current account deficit. However, the balance of
risks is on the downside as domestic and international uncertainties could
weigh on investment, reducing medium-term prospects.

“The recent high headline inflation rate reflects both temporary factors
and the impact of the lari’s depreciation. The National Bank of Georgia
(NBG) has appropriately tightened monetary policy to address inflationary
pressures. Exchange rate flexibility remains vital as a shock absorber for
the Georgian economy, and foreign exchange interventions should be limited
to addressing excessive volatility or building reserves.

“The 2020 budget appropriately targets a neutral fiscal stance while
increasing spending on education and social benefits. Continued vigilance
against fiscal risks stemming from power purchasing agreements and
state-owned enterprises is needed to safeguard investment in infrastructure
and human capital while maintaining debt sustainability. A new indexation
rule for basic pensions needs to protect pensioners’ income against
inflation while preserving budget flexibility to provide space for more
targeted social spending in the future.

“Advancing financial and structural reforms would make the economy more
resilient to shocks and sustain higher and more inclusive medium-term
growth. Effective and timely implementation of the education reform would
help create a more skilled labor force, enhancing medium-term growth and
new frameworks for banking resolution and insolvency should help strengthen
financial resilience and improve the business environment. Completing the
establishment of the funded pension pillar, should help mobilize savings
for investment to support medium-term growth and provide an additional
safety net for the elderly.

“The extension of the IMF program should support the authorities’ efforts
in maintaining policy discipline and implementing these reforms.”



Table 1. Georgia: Selected Economic and Financial
Indicators, 2016–20 1/


2016


2017


2018


2019


2019


2020


Actual


CR 19/171 2/


National accounts
and prices

(annual percentage
change; unless
otherwise
indicated)

Real GDP

2.8

4.8

4.7

4.6

4.6

4.3

Nominal GDP (in
billions of lari)

34.0

37.8

41.1

44.5

45.2

49.2

Nominal GDP (in
billions of US$)

14.4

15.1

16.2

16.6

16.1

17.2

GDP per capita (in
thousands of US$)

3.9

4.0

4.3

4.5

4.3

4.7

GDP deflator,
period average

4.2

6.1

3.7

3.5

4.9

4.7

CPI, Period average

2.1

6.0

2.6

3.8

4.9

4.5

CPI, End-of-period

1.8

6.7

1.5

4.5

7.2

3.0


Investment and
saving

(in percent of GDP)

Gross national
saving

19.6

23.7

26.6

25.6

28.4

28.4

Investment

32.7

32.4

34.0

33.1

33.8

33.7

Public

5.0

6.1

7.0

7.2

7.8

7.2

Private

27.7

26.3

27.0

25.9

26.0

26.5


Consolidated
government
operations

(in percent of GDP)

Revenue and grants

28.3

29.2

28.6

28.4

28.6

27.6

o.w. Tax revenue

25.7

26.2

25.4

25.4

25.5

24.9

Expenditures

32.5

32.8

31.7

31.4

31.3

30.7

Current
expenditures

26.0

24.3

23.1

23.4

23.1

23.2

Capital spending
and budget lending

6.5

8.5

8.6

8.0

8.2

7.5

Net
Lending/Borrowing
(GFSM 2001)

-1.5

-0.5

-0.9

-1.9

-1.9

-2.4

Augmented Net
lending / borrowing
(Program
definition) 3/

-2.9

-2.9

-2.5

-2.6

-2.3

-2.7

Public debt

44.4

45.1

44.9

46.7

47.9

48.3

o.w. NBG debt to
the IMF

0.6

0.5

35.6

1.0

1.1

o.w.
Foreign-currency
denominated

35.1

35.7

35.3

43.1

37.2

36.6


Money and credit

(in percent; unless
otherwise
indicated)

Credit to the
private sector
(annual percentage
change)

19.6

17.6

19.3

12.3

17.3

8.5

In constant
exchange rate

11.8

18.3

17.0

11.9

11.5

7.5

Broad money (annual
percentage change)

20.4

14.8

14.0

12.8

14.7

9.2

Broad money (incl.
fx deposits, annual
percentage change)

19.1

13.7

13.3

11.8

14.9

8.1

In constant
exchange rate

13.4

15.8

11.9

12.4

9.2

8.1

Deposit
dollarization (in
percent of total)

69.9

63.7

62.1

60.6

62.9

62.7

Credit
dollarization (in
percent of total)

64.6

56.1

55.8

53.7

53.7

51.3

Credit to GDP

54.9

58.1

63.8

66.2

68.1

67.8


External sector

(in percent of GDP;
unless otherwise
indicated)

Current account
balance

-13.1

-8.7

-7.3

-7.5

-5.4

-5.3

Trade balance

-26.9

-25.2

-25.4

-25.2

-22.7

-22.2

Terms of trade
(percent change)

-1.4

-2.7

-5.0

1.2

0.2

-1.8

Gross international
reserves (in
billions of US$)

2.8

3.0

3.3

3.7

3.3

3.4

In percent of IMF
Composite measure
(floating)

94.7

93.7

94.6

100.1

96.4

95.9

Gross external debt

110.2

114.0

111.9

117.0

118.6

117.2

Gross external
debt, excl.
intercompany loans

88.2

91.3

89.8

97.8

95.2

94.0

Laris per U.S.
dollar (period
average)

2.37

2.51

2.53

Laris per euro
(period average)

2.62

2.83

2.99

REER (period
average; CPI based,
2010=100)

100.5

100.6

104.1

Sources: Georgian
authorities; and
Fund staff estimate

1/ These numbers do
not reflect the
impact of GDP
rebasing announced
by Geostat on
November 15 th,
2019.

2/ Please refer to
this link for
details
https://www.imf.org/en/Publications/CR/Issues/2019/06/19/Georgia-Fourth-Review-Under-the-Extended-Fund-Facility-Arrangement-and-Request-for-47008

3/ Augmented Net
lending / borrowing
(Program
definition) = Net
lending / borrowing
– Budget lending.


IMF Communications Department
MEDIA RELATIONS

PRESS OFFICER: Randa Elnagar

Phone: +1 202 623-7100Email: MEDIA@IMF.org

@IMFSpokesperson








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