Statement by Shigemitsu Sugisaki
Deputy Managing Director
International Monetary Fund
Tbilisi, Georgia

December 11, 1998

I welcome the opportunity to have held a wide range of meetings with the political, economic and legislative leadership of Georgia today. In these meetings, cordial and frank discussions took place on the prevailing economic environment in Georgia as well as the outlook for the near future. In my discussions I noted that the decision to cease interventions in the foreign exchange market is appropriate and I strongly commended the authorities for this courageous move. I also noted the need to implement similarly bold moves in the area of fiscal consolidation in order to provide support for the exchange rate.

The year 1998 has been a particularly difficult period for the public finances due to both internal and external factors, as an already fragile fiscal situation was severely complicated by the economic events in Russia. A significant strengthening of efforts to collect tax revenues is imperative to support the overall macroeconomic objectives of the program and to meet government expenditures on a timely basis. The vigorous implementation and measures that would improve revenue collection include the implementation of recent Tax Code amendments, strengthened efforts for the collection of taxes on cigarettes, expansion of the large tax payers unit, and strong action to eliminate tax evasion.

The leadership of Georgia clearly recognizes the magnitude of the challenges ahead and we broadly concurred on policies that Georgia must pursue to secure financial stabilization. I was encouraged by the assurances provided by President Shevardnadze and his economic team that they will tackle the fiscal situation immediately, through prompt actions to raise the level of tax collections. I on my part noted that, while the international community stands ready to help Georgia in its adjustment efforts, it is important to translate these assurances into tangible results. I also noted that there was no substitute for revenue mobilization and an eradication of the culture of non-payment. The President strongly endorsed this position; he and his economic team outlined several initiatives currently underway that should lead to a sustained increase in budgetary revenues. I am hopeful that in the weeks ahead the government's efforts will begin to bear fruit.

Discussions between the authorities and the IMF staff will resume in January 1999 with the aim of assessing the outcome of the various initiatives currently underway and to continue discussions on an economic program for 1999.