Press Release: IMF Completes First Review Under the Stand-By Arrangement for Georgia
IMF News, December 16, 2008
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- Press Release: IMF Completes First Review Under the Stand-By Arrangement for Georgia
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Bibliographic details
- Published: December 16, 2008
Overview
- Press Release No. 08/328; December 16, 2008.
- The Executive Board completed the first review of Georgia's performance under an 18-month SDR 477.1 million (about US$726 million) Stand-By Arrangement, which was approved on September 15, 2008 (see Press Release No. 08/208).
- The Georgian authorities expressed their intention not to draw the amount available at the completion of this review.
- The first review also satisfies the review prescribed under the Emergency Financing Mechanism in relation to the initial policy response and the reaction of markets to these policies.
- Executive Board discussion occurred on December 15, 2009.
Key findings and outcomes
- The SBA produced positive initial results: it helped to boost international reserves, ease pressures in financial markets, and mobilize significant donor assistance in support of reconstruction and infrastructure spending.
- Market uneasiness resumed in late September as the global financial crisis spread, adding to post-conflict uncertainties; the lari depreciated against the U.S. dollar in November.
- Since the depreciation, the National Bank of Georgia has intervened moderately in the market to stabilize the exchange rate.
- Financial assistance from international financial institutions is expected to help banks meet their maturing external obligations.
Program priorities and policy guidance
- Main program priorities until access to international markets is restored and confidence regained:
- Sustaining economic growth.
- Maintaining confidence in the currency and the financial system, within the constraints of available external financing.
- Fiscal policy:
- Aimed at supporting economic activity while addressing key social and reconstruction needs.
- Authorities intend to boost capital spending while minimizing unproductive outlays, aided by generous support from development partners in the form of grants and concessional financing.
- Monetary policy:
- Will focus on achieving the inflation objective by assigning a more active role to interest rate adjustments in the context of exchange rate flexibility.
- Financial sector policy:
- Authorities plan to enhance bank regulation and supervision capacity, and to work with banks to mitigate liquidity risks and avoid a deterioration of bank asset quality.
- The recently signed memorandum of understanding between the National Bank of Georgia and the Financial Supervisory Agency provides an important instrument for enhancing policy coordination between both institutions.
Risks, readiness, and conditionality
- Continued success depends on readiness to act quickly to strengthen policies if needed in the face of a difficult and uncertain external environment.
- The authorities remain committed to a flexible exchange rate regime and to maintaining an adequate level of international reserves.
Selected exact figures and dates
- Stand-By Arrangement size: SDR 477.1 million (about US$726 million).
- Arrangement duration: 18-month.
- Arrangement approval date: September 15, 2008.
- Press Release date: December 16, 2008.
- Executive Board discussion: December 15, 2009.
Direct statements (Mr. Takatoshi Kato, Deputy Managing Director and Acting Chair)
- "Georgia's Stand-By Arrangement (SBA) in support of the authorities' strong actions to stabilize financial markets has produced positive initial results. It has helped to boost international reserves, ease pressures in financial markets, and mobilize significant donor assistance in support of reconstruction and infrastructure spending."
- "Looking ahead, the authorities' program will focus on addressing the challenges posed by the international financial turmoil and the global economic slowdown. Sustaining economic growth and maintaining confidence in the currency and the financial system, within the constraints of available external financing, are the program's main priorities until access to international markets is restored and confidence regained."
- "Market uneasiness resumed in late September as the global financial crisis spread, adding to the post-conflict uncertainties. In response, the lari depreciated against the U.S. dollar in November. Since then, the National Bank of Georgia has intervened moderately in the market to stabilize the exchange rate. The authorities remain committed to a flexible exchange rate regime and to maintaining an adequate level of international reserves."
- "Fiscal policy is aimed at supporting economic activity while addressing key social and reconstruction needs. Aided by generous support from development partners in the form of grants and concessional financing, the authorities intend to boost capital spending while minimizing unproductive outlays. Monetary policy will focus on achieving the inflation objective by assigning a more active role to interest rate adjustments in the context of exchange rate flexibility."
- "Financial assistance from international financial institutions is expected to help banks meet their maturing external obligations. The authorities are planning to enhance bank regulation and supervision capacity, and to work with banks to mitigate liquidity risks and avoid a deterioration of bank asset quality. The recently signed memorandum of understanding between the National Bank of Georgia and the Financial Supervisory Agency provides an important instrument for enhancing policy coordination between both institutions."
- "The authorities' readiness to act quickly to strengthen policies if needed will be key to ensure continued successful economic performance in the face of the difficult and uncertain external environment," Mr. Kato said.
Press Release No. 08/328, December 16, 2008, International Monetary Fund.