Press Release: IMF Executive Board Approves US$750 Million Stand-By Arrangement for Georgia
IMF News, September 15, 2008
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- Published: September 15, 2008
Executive Board approval and arrangement terms
- The Executive Board approved an 18-month Stand-By Arrangement (SBA) with total access equivalent to SDR 477.1 million (about US$750 million).
- The SBA involves exceptional access as it would exceed limits of 100 percent of Georgia's IMF quota annually and 300 percent of the quota (net of scheduled repurchases) cumulatively.
- Disbursement schedule:
- An amount equivalent to SDR 161.7 million (US$250 million) will be made available immediately.
- The remaining balance will be distributed in six installments over the next 18 months.
Program objectives and context
- Primary aims:
- Rebuild gross international reserves.
- Bolster investor confidence to sustain private capital inflows that previously financed growth.
- Limit deterioration in the external accounts.
- Context:
- The program responds to pressures following the early-August armed conflict: decline in international reserves, fall in bank deposits, and increased Eurobond spreads.
- Georgia is expected to receive additional financial assistance from multilateral and bilateral donors and creditors for reconstruction.
Fiscal policy stance and financing
- Fiscal strategy:
- Reduce current spending to free resources for relief and reconstruction.
- Accommodate concessional loans and grants from multilateral and bilateral partners within the program's fiscal targets.
- Currently available financing for 2008-09 comprises:
- The proceeds of the $500 million Eurobond issued this year.
- Privatization receipts.
- Donors' support for reconstruction.
- Program fiscal objectives (selected indicators in percent of GDP):
- Revenue: 26.7 (2006), 29.2 (2007), 27.7 (2008), 26.0 (2009).
- Expenses: 20.8 (2006), 25.0 (2007), 26.6 (2008), 23.1 (2009).
- Operational balance / Capital spending and net lending / Total balance: 9.0; 7.3; 6.7; (presented in table format in source) and Total balance: -3.0 (2006), -4.7 (2007), -6.3 (2008), -3.8 (2009).
- Total financing (program definition): 3.0 (2006), 4.5 (2007).
- Domestic financing: -1.7 (2006), -0.9 (2007), 1.3 (2008), -0.3 (2009).
- External financing: -0.4 (2006), 1.5 (2007), 3.1 (2008).
- Privatization receipts: 5.2 (2006), 3.2 (2007), 0.9 (2008).
Monetary policy and financial sector measures
- Monetary stance:
- Focus on providing sufficient liquidity to the banking system while maintaining a stable exchange rate and an adequate level of international reserves.
- Program supports short-term policy of avoiding excessive exchange rate volatility and envisages a return to a flexible exchange rate regime.
- Financial sector measures:
- Strengthen framework for managing liquidity.
- Build up capacity and strengthen independence of the Financial Supervision Agency (FSA).
- Enhance cooperation between the FSA and the central bank.
- Supervisory authorities will work with banks to assess vulnerabilities and mitigate risks.
Economic impact, vulnerabilities, and recovery prospects (Annex summary)
- Pre-conflict performance:
- Economic growth reached double digits; inflation around 10 percent.
- External current account deficit reached 20 percent of GDP in 2007 and was fully financed by private capital inflows, in particular foreign direct investment.
- Conflict impact:
- Pressures on the capital account led to a decline in international reserves, a fall in bank deposits, and increased Eurobond spreads.
- Recovery prospects:
- The economy is described as well placed to recover due to an impressive record of adjustment and reform that strengthened economic structure and resilience.
Selected macroeconomic indicators, 2006-09 (as presented)
- National accounts (annual percentage change, unless otherwise indicated):
- Real GDP growth: 9.4 (2006 Act.), 12.4 (2007 Prel.), 3.5 (2008 Proj.), 4.0 (2009 Proj.).
- Population (million) 1/: 4.3 (2006), 4.4 (2007).
- Consumer price index, period average: 9.2 (2006), 10.0 (2007), 7.6 (2008).
- Consumer price index, end-of-period: 8.8 (2006), 11.0 (2007), 8.0 (2008).
- GDP per capita (US$): 1,800 (2006), 2,324 (2007), 2,895 (2008), 3,167 (2009).
- Poverty rate (in percent): 31.0 (2006), ...
- Unemployment rate (in percent): 13.6 (2006), 13.3 (2007).
- Investment and saving (in percent of GDP):
- Investment: 25.6 (2006), 28.1 (2007), 23.7 (2008), 22.2 (2009).
- Public investment: 2.5 (2006), 3.4 (2007), 3.6 (2008), 5.6 (2009).
- Private investment: 23.0 (2006), 24.7 (2007), 20.1 (2008), 16.6 (2009).
- Gross national saving: 9.7 (2006), 8.1 (2007), 2.9 (2008), 5.9 (2009).
- Saving-investment balance: -15.9 (2006), -20.0 (2007), -20.8 (2008), -18.7 (2009).
- Monetary sector:
- Reserve money: 19.2 (2006), 19.0 (2007), 12.0 (2008).
- Broad money (including foreign exch. deposits): 39.3 (2006), 49.6 (2007), 14.0 (2008), 18.0 (2009).
- Private credit: 53.4 (2006), 68.9 (2007), 21.2 (2008), 15.2 (2009).
- External sector:
- Exports of goods and services (percent of GDP): 33.1 (2006), 31.7 (2007), 27.6 (2008).
- Exports annual percentage change: 17.6 (2006), 26.1 (2007), 13.1 (2008), 11.5 (2009).
- Imports of goods and services (percent of GDP): 56.8 (2006), 57.8 (2007), 52.9 (2008), 33.0 (2009).
- Imports annual percentage change: 34.0 (2006), 20.0 (2007), 4.1 (2008).
- Current account balance (in millions of US$): -1,235 (2006), -2,047 (2007), -2,757 (2008), -2,618 (2009).
- Current account balance (in percent of GDP): (table includes values aligned with above current account series).
- Gross international reserves (in millions of US$): 881 (2006), 1,361 (2007), 1,270 (2008), 1,755 (2009).
- Reserves in months of next year's imports of goods and services: 1.8 (2006), 2.3 (2007), 2.1 (2008), 2.6 (2009).
- Foreign direct investment (percent of GDP): 13.9 (2006), 15.3 (2007), 9.3 (2008), 8.6 (2009).
Press Release No. 08/208, September 15, 2008.