Reserve Adequacy in Georgia: How Much is Enough?

Selected Issues Papers, June 23, 2026

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Extends the Jeanne-Ranciѐre (2011) framework to assess Georgia’s optimal level of international reserves.
Incorporates three additional channels particularly relevant to Georgia:
- (i) sovereign risk and borrowing costs;
- (ii) private-sector dollarization;
- (iii) foreign exchange volatility associated with market shallowness, building on Chen and others (2023).
Presents an integrated framework intended to provide a more comprehensive measure of reserve adequacy than the baseline approach for partially dollarized emerging markets.

Under the extended framework, Georgia’s optimal reserve coverage is estimated at around 145-150 percent of the IMF’s ARA metric.
Under the baseline framework, optimal coverage is about 130 percent of the IMF’s ARA metric.
Current reserves are roughly 105 percent of the IMF’s ARA metric.
The gap between current reserves and the extended-framework optimal implies scope for additional reserve accumulation to strengthen resilience against external shocks.

Additional reserve accumulation is warranted to move from roughly 105 percent of ARA toward the estimated optimal range of 145-150 percent of ARA.
Policies should consider the three tailored channels (sovereign risk and borrowing costs; private-sector dollarization; foreign exchange volatility from market shallowness) when designing reserve management and accumulation strategies.
The integrated framework suggests that reserve adequacy assessments for partially dollarized emerging markets should go beyond baseline ARA metrics to capture country-specific risk channels.

Reserve Adequacy in Georgia: How Much is Enough?
- Reserve Adequacy in Georgia: How Much is Enough? (Markdown version)
- Reserve Adequacy in Georgia: How Much is Enough? (PDF)