## Reserve Adequacy in Georgia: How Much is Enough?

_Selected Issues Papers, June 23, 2026_

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## Bibliographic details
- Authors: Mehmet Cangul, Will Abel
- Published: June 23, 2026
- Series: Selected Issues Papers
- DOI: https://doi.org/10.5089/9798229051323.018

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### Framework and Extensions
- 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.

### Main Findings and Quantitative Results
- 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.

### Policy Implications and Recommendations
- 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.

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_Source: https://www.imf.org/en/publications/selected-issues-papers/issues/2026/06/22/reserve-adequacy-in-georgia-how-much-is-enough-577155_