Georgia: Request for a Stand-by Arrangement

IMF Staff Country Reports, August 20, 2014

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Georgia: Request for a Stand-by Arrangement

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Bibliographic details

• Published: August 20, 2014
• Series: IMF Staff Country Reports
• DOI: https://doi.org/10.5089/9781498382069.002

Context

• Previous Fund-supported program expired in April 2014 and "met most of its objectives," notably by reducing Georgia’s external and fiscal imbalances and preserving the central bank’s independence after the 2012–13 political transition.
• The prior program strengthened Georgia’s inflation-targeting framework.
• Tensions emerged between the program’s fiscal objectives and the new government's policies of increasing social spending, especially after the economy slowed and revenues fell short in 2013.
• Remaining macroeconomic vulnerabilities:
  • High current account deficit.
  • High external debt.
  • Widespread poverty and high unemployment requiring strong and inclusive growth.
• The external outlook worsened, creating a balance of payments need in 2014.

Program and its objectives

• Authorities requested a new three-year SDR 100 million (67 percent of quota) Stand-by Arrangement to address an external financing need in 2014 related in part to the realignment of fiscal policies to more social spending.
• Program aims:
  • Facilitate Georgia’s external adjustment.
  • Reduce key macroeconomic vulnerabilities.
  • Rebuild policy buffers.
  • Support growth.

Program policies (design and sequencing)

• 2014 policy stance:
  • Balance supporting domestic demand with safeguarding external stability.
  • Fiscal policy: provide a measured stimulus to reduce the output gap.
  • Monetary policy: remain accommodative.
  • Authorities will tighten policies and allow the exchange rate to adjust if balance of payments pressures intensify.
• From 2015 onward:
  • Reduce the fiscal deficit to keep public debt low and create space for countercyclical policies.
  • Consolidation strategy:
  • Raise revenue by broadening the tax base.
  • Contain current expenditure.
  • Protect pro-poor spending and public investment.
  • Monetary policy: aim at price stability through improved inflation targeting.
  • Rebuild international reserves while encouraging greater exchange rate flexibility.

Financial sector and institutional measures

• Strengthening of the financial sector will continue, supported by recommendations of the recent FSAP mission.
• Program aims to:
  • Contain risks from quasi-fiscal activities.
  • Support improvements in tax administration.
  • Complement authorities’ reforms to strengthen the business environment, improve education and training, create jobs, and reduce poverty and inequality.

Key quoted numeric and temporal facts

• "expired in April 2014"
• "2012–13 political transition"
• "SDR 100 million (67 percent of quota)"
• "three-year" arrangement
• "external financing need in 2014"
• Policy transition point: "From 2015"

Georgia: Request for a Stand-by Arrangement — IMF Staff Country Report No. 2014/250.

Content in this bundle

• 1. The Georgia 2020 Strategy
  • 1. The Georgia 2020 Strategy (Markdown version)
  • 1. The Georgia 2020 Strategy (PDF)