Washington, DC:
At the request of the Georgian authorities, an International Monetary Fund
(IMF) team led by Mr. James John held virtual meetings with Georgian
officials between November 18, 2021 and March 31, 2022 to discuss a
three-year economic program that could be supported by the IMF under a
Stand-By Arrangement (SBA).
At the conclusion of the mission, Mr. John issued the following statement:
“I am pleased to announce that the IMF team has reached a staff-level
agreement with the Georgian authorities on a three-year Stand-by
Arrangement (SBA) in the amount of SDR210.4 million (about $289 million) or
100 percent of Georgia’s quota. The agreement is subject to approval by the
IMF’s Executive Board, which is expected to consider Georgia’s request in
May.
“Georgia’s economy was enjoying a strong recovery from the COVID-19
pandemic—growth reached 10.4 percent in 2021—before the Russian invasion of
Ukraine. Spillovers from the war and sanctions are expected to lower
Georgia’s growth to around 3 percent in 2022, raise inflation, and widen
the current account deficit. The outlook is subject to a higher-than-usual
level of uncertainty. Georgia’s economy has proven resilient in the past,
and with the support of policies under the authorities’ program, we expect
growth to pick up in 2023 and other key indicators to strengthen as well.
“The authorities’ program aims to maintain and further entrench
macroeconomic stability in the context of back-to-back shocks from the
pandemic and the war in Ukraine, strengthen medium-term growth, and enhance
economic resilience.
“After substantial pandemic support, fiscal policies are geared toward
reducing the deficit to comply with the fiscal rule by 2023, restoring
fiscal buffers, and creating space for priorities such as infrastructure
and education. Should spillovers from the war such as elevated global
commodity prices prove more severe than expected, targeted measures to help
the vulnerable could be considered within the budget envelope. The program
will also seek to improve public financial management and limit fiscal
risks, especially through finalization and implementation of a strategy to
enhance governance of state-owned enterprises.
“Several global shocks have contributed to inflation that is well above
target in Georgia. The National Bank of Georgia continues to be
appropriately focused on bringing inflation to target and we expect
significant progress this year and next as global factors that are
contributing to the surge in prices subside. The inflation targeting
framework combined with the flexible exchange rate regime has served
Georgia well. The authorities are committed to exchange rate flexibility,
which acts as a shock absorber, and interventions will be limited to
smoothing excessive volatility and preventing disorderly market conditions.
“Georgia’s financial sector has shown considerable resilience to the
pandemic and the war in Ukraine, reflecting a robust supervisory and
regulatory framework including the introduction and recalibration of
macroprudential measures. Quick and appropriate NBG action has helped limit
the impact of the war, including by requiring banks to adhere to relevant
sanctions. Financial sector policies will be further strengthened in a
number of areas such as supervision, the prompt corrective action
framework, and large exposures, following up on recommendations from the
recent IMF-World Bank Financial Sector Assessment Program. Sustained strong
macroeconomic and financial sector policies should also help reduce still
high dollarization and related vulnerabilities over time.
“To strengthen growth and make it more inclusive, the authorities’
structural reform priorities focus on education and training to tackle high
unemployment and address labor market mismatches, and on upgrading the
country’s infrastructure. Actions in these areas will improve the business
environment, foster regional integration, and enhance the country’s
potential as a transportation and logistics hub.
“During the visit, the team met with Governor of the National Bank of
Georgia Mr. Gvenetadze, Minister of Finance Mr. Khutsishvili, Minister of
Economy and Sustainable Development Mr. Davitashvili and his predecessor
Ms. Turnava, and other senior government officials, as well as with
representatives of Georgia’s international development partners, civil
society, and the banking and business communities.
“The IMF team would like to thank its counterparts for the open and
constructive discussions and collaboration that have brought us to today’s
successful conclusion.”
