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

IMF News, June 19, 2019

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Canonical URL: IMF Executive Board Completes the Fourth Review of the Extended Arrangement under the Extended Fund Facility for Georgia

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Published: June 19, 2019

Summary of action and financing

On June 19, the Executive Board completed the Fourth 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 150 million (about $207.2 million).
The extended arrangement for SDR 210.4 million (100 percent of quota) was approved on April 12, 2017 (Press Release No. 17/130).

Macro performance and outlook (authorities’ and IMF assessment)

Georgia’s economic performance remains robust with resilient growth, inflation under control, and reduced external vulnerabilities.
Although the outlook is favorable, the authorities need to be prepared to address any negative spillovers from external developments and persevere with structural reforms to promote higher and more inclusive growth.
Monetary policy: focused on price stability; recent increases in inflation are driven by temporary factors, so a neutral monetary policy stance remains appropriate.
Financial sector: tighter lending standards have slowed credit growth, making credit growth more sustainable.
Exchange rate and reserves: the inflation‑targeting framework, combined with exchange rate flexibility, and interventions that help build reserves continue to serve Georgia well.

Policy priorities and structural reforms highlighted

Fiscal: fiscal deficit projected to remain relatively stable in 2019 and over the medium term reflecting the authorities’ commitment to fiscal sustainability. Higher spending on public education will be offset with slower growth in infrastructure investment.
Education: a comprehensive education reform is needed to boost education quality and reduce skills mismatches in the labor force; salary increases should be accompanied by other steps to boost education quality.
Insolvency, pensions, judiciary: a new insolvency law, making the pension agency fully operational, and reforms to promote a transparent and independent judiciary would help mobilize investment.
Energy: authorities’ energy market reforms could improve market competition and energy efficiency.
Overall: “Sound policies and further reforms under the IMF program will help preserve the gains made, strengthen economic resilience, and foster stronger and more inclusive growth.”—IMF’s Lipton

Selected economic and financial indicators, 2016–2020 (actuals and projections)

Real GDP (annual percentage change)
- 2016: 2.8
- 2017: 4.8
- 2018: 4.7
- 2019: 4.6
- 2020: (projection) not shown as single value in table header but subsequent projection row indicates 4.6 for 2019 and 4.6 is last listed; table columns show 2020 column present
Nominal GDP (in billion of laris)
- 2016: 34.0
- 2017: 37.8
- 2018: 41.1
- 2019: 45.0
- 2020: 44.5, 48.1 (table shows two numbers under 2019–2020 projection columns; preserve exact entries as presented)
Nominal GDP (in billion of U.S. dollars)
- 2016: 14.4
- 2017: 15.1
- 2018: 16.2
- 2019: 17.2
- 2020: 16.6, 18.1
GDP per capita (in thousand of U.S. dollars)
- 2016: 3.9
- 2017: 4.0
- 2018: 4.3
- 2019: 4.5
- 2020: 4.9
GDP deflator, period average
- 2016: 4.2
- 2017: 6.1
- 2018: 3.7
- 2019: 3.4
- 2020: 3.5, 3.3
CPI, Period average
- 2016: 2.1
- 2017: 6.0
- 2018: 2.6
- 2019: 3.1
- 2020: 3.8, 3.2
CPI, End-of-period
- 2016: 1.8
- 2017: 6.7
- 2018: 1.5
- 2019: 3.0

Investment and saving (in percent of GDP)
- Gross national saving
- 2016: 19.6
- 2017: 23.6
- 2018: 25.7
- 2019: 25.4
- 2020: 25.6, 26.4
- Investment
- 2016: 32.7
- 2017: 32.4
- 2018: 33.4
- 2019: 34.9
- 2020: 33.1, 33.8
- Public
- 2016: 5.0
- 2017: 7.0
- 2018: 7.1
- 2019: 7.2
- 2020: 6.9
- Private
- 2016: 27.7
- 2017: 26.3
- 2018: 27.9
- 2019: 25.9
- 2020: 26.8

Consolidated government operations
- Revenue and grants
- 2016: 28.3
- 2017: 29.2
- 2018: 28.6
- 2019: 28.0
- 2020: 28.4, 28.1
- o.w. Tax revenue
- 2016: 26.2
- 2017: 25.1
- 2018: 25.2
- Expenditures
- 2016: 32.5
- 2017: 32.8
- 2018: 31.7
- 2019: 30.9
- 2020: 31.4, 31.1
- Current expenditures
- 2016: 26.0
- 2017: 24.3
- 2018: 23.1
- 2019: 23.4
- 2020: 23.5, 23.5
- Capital spending and budget lending
- 2016: 6.5
- 2017: 8.5
- 2018: 8.6
- 2019: 7.8
- 2020: 8.0, 7.6
- Net Lending/Borrowing (GFSM 2001)
- 2016: -1.5
- 2017: -0.5
- 2018: -0.9
- 2019: -1.9
- 2020: -2.0
- Augmented Net lending / borrowing (Program definition) 2/
- 2016: -2.9
- 2017: -2.5
- 2018: -2.6
- 2019: -2.7

Public debt
- 2016: 44.4
- 2017: 45.1
- 2018: 44.9
- 2019: 43.5
- 2020: 46.7, 48.3
- o.w. NBG debt to the IMF
- 2016: …
- 2017: 0.6
- 2018: 0.5
- 2019: 1.0
- 2020: 1.1
- o.w. Foreign-currency denominated
- 2016: 35.1
- 2017: 35.7
- 2018: 35.3
- 2019: 35.6
- 2020: 35.0

Money and credit (in percent; unless otherwise indicated)
- Credit to the private sector (annual percentage change)
- 2016: 17.6
- 2017: 19.3
- 2018: 12.6
- 2019: 12.3
- 2020: 10.8
- In constant exchange rate
- 2016: 11.8
- 2017: 19.1
- 2018: 17.1
- 2019: 13.1
- 2020: 11.9, 11.5
- Broad money (annual percentage change)
- 2016: 20.4
- 2017: 14.8
- 2018: 14.0
- 2019: 12.2
- 2020: 12.8, 12.9
- Broad money (incl. fx deposits, annual percentage change)
- 2016: 13.7
- 2017: 13.3
- 2018: 13.4
- 2019: 16.3
- 2020: 12.1, 12.4, 13.6
- Deposit dollarization (in percent of total)
- 2016: 69.9
- 2017: 63.7
- 2018: 62.1
- 2019: 59.6
- 2020: 60.6
- Credit dollarization (in percent of total)
- 2016: 64.6
- 2017: 56.1
- 2018: 55.8
- 2019: 51.3
- 2020: 53.7
- Credit to GDP
- 2016: 54.9
- 2017: 58.1
- 2018: 63.8
- 2019: 66.2
- 2020: 67.8

External sector (in percent of GDP; unless otherwise indicated)
- Current account balance
- 2016: -13.1
- 2017: -8.8
- 2018: -7.7
- 2019: -9.5
- 2020: -7.5, -7.3
- Trade balance
- 2016: -26.9
- 2017: -25.2
- 2018: -25.3
- 2019: -27.4
- 2020: -24.9
- Terms of trade (percent change)
- 2016: -1.4
- 2017: -4.9
- 2018: 1.2
- 2019: -1.3
- Gross international reserves (in billions of US$)
- 2016: 4.1
- In percent of IMF Composite measure (floating)
- 2016: 0.0
- 2017: 88.9
- 2018: 90.8
- 2019: 95.6
- 2020: 100.1, 105.2
- Gross external debt
- 2016: 109.9
- 2017: 113.7
- 2018: 112.9
- 2019: 113.3
- 2020: 117.0, 116.4
- Gross external debt, excl. intercompany loans
- 2016: 92.0
- 2017: 96.3
- 2018: 94.6
- 2019: 95.0
- 2020: 97.8, 97.4
- Laris per U.S. dollar (period average)
- 2016: 2.37
- 2017: 2.51
- Laris per euro (period average)
- 2016: 2.62
- 2017: 2.83
- REER (period average; CPI based, 2010=100)
- 2016: 100.5
- 2017: 100.6

Key implications for policy and reform sequencing

Maintain fiscal sustainability while reallocating spending toward education; offset higher education spending with slower infrastructure investment growth.
Proceed with comprehensive education reform to improve quality and reduce skills mismatches; accompany salary increases with structural measures.
Advance insolvency reform, operationalize the pension agency, and pursue judiciary reforms to mobilize private investment.
Continue energy market reforms to enhance competition and energy efficiency.
Keep monetary policy geared to price stability and allow the inflation‑targeting framework and exchange rate flexibility to function, with interventions to build reserves when appropriate.

IMF Press Release No. 19/227, June 19, 2019.

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

Source details

Other formats

Bibliographic details

Summary of action and financing

Macro performance and outlook (authorities’ and IMF assessment)

Policy priorities and structural reforms highlighted

Selected economic and financial indicators, 2016–2020 (actuals and projections)

Key implications for policy and reform sequencing

References