IMF Executive Board Completes Ninth and Final Review Under Stand-By Arrangement for GeorgiaPress Release No. 11/224
June 9, 2011
On June 8, 2011, the Executive Board of the International Monetary Fund (IMF) completed the ninth and final review of Georgia’s performance under the economic program supported by a Stand-By Arrangement.
Georgia’s Stand-By Arrangement was approved by the Board on September 15, 2008 (see Press Release No. 08/208) for an amount equivalent to SDR 477.1 million (about US$ 770 million1). On August 6, 2009, the Executive Board approved an augmentation of access under the SBA to an amount equivalent to SDR 747.1 million (about US$ 1.2 billion) and an extension of the SBA until June 14, 2011 (see Press Release No. 09/277). Between 2008 and July 2010, an amount equivalent to SDR 577.1 million (about US$ 930 million) was disbursed under the SBA. Since then, the authorities have treated the arrangement as precautionary. The arrangement expires June 14, 2011.
In completing the review, the Board approved a waiver for the nonobservance of the performance criterion related to government expenditure.
Following the Executive Board’s discussion on Georgia, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair, said:
“The Georgian authorities are to be commended for successfully implementing the SBA-supported program. The program objectives have been largely achieved, evidenced by the rebound in economic activity, improved market confidence, and the recovery of international reserves to their pre-crisis level. At the same time, the external adjustment process is not yet complete; public debt should be reduced further; and growth needs to be sustained to reduce unemployment. It will be important for the authorities’ medium-term policy framework to address decisively these challenges.
“The authorities are firmly committed to fiscal consolidation. It will be important to preserve sufficient flexibility to introduce revenue-enhancing measures, should the need arise. Moreover, the planned increase in pensions should be structured and financed in a way that does not compromise the fiscal objectives.
“The authorities’ current monetary policy stance is appropriate in the absence of second-round effects from the food and fuel price hikes. The authorities stand ready to adjust this stance promptly if signs of more persistent inflation emerge. The enhanced exchange rate flexibility achieved over the course of the program is commendable and should remain an anchor of the authorities’ economic strategy.
“The banking sector has largely overcome the stress from the 2008 conflict and global financial crisis. Close monitoring for any signs of emerging new vulnerabilities in the sector will be important. The steps taken by the supervisory authority to strengthen its internal analytical capacity and responsiveness to risks are welcome.”
1 The amounts in U.S. dollars are calculated based on the SDR/US$ exchange rate on June 7, 2011, with one U.S. dollar equal to SDR 0.61974.