For more information, see Georgia and the IMF

Georgia—Enhanced Structural Adjustment Facility
Policy Framework Paper, 1998–2000

Tables 1-4

Table 1. Georgia: Selected Economic and Financial Indicators, 1995-2000

             
 

1995

1996

1997

1998

1999

2000

       
     

Prel.

Program
 

(Annual percentage change, unless otherwise indicated)

Output, incomes, and prices

           

Real GDP

2.4

10.5

11.0

10.0

8.0

8.0

Real GDP per capita

2.6

11.5

10.9

9.8

7.8

7.8

Consumer Price Index (year-end)

57.4

13.7

7.3

6.0

5.0

4.0

             

External sector (in millions of U.S. dollars)

           

Exports (f.o.b.) at current prices

363

417

463

559

639

727

Imports (c.i.f.) at current prices

700

710

947

1,093

1,103

1,227

Terms of trade (decline, -)

           

Real effective exchange rate (depreciation, -)

           

Money and credit

           

Net domestic assets

107

72

58

36

22

18

Net domestic credit

86

61

56

31

20

16

Government

300

198

68

27

14

8

Non-Government sector

45

-13

35

41

32

31

Money and quasi-money (M3) 1/

135

42

46

26

23

20

Central bank intervention rate (percent per annum)

           

 

(In percent of GDP, unless otherwise indicated)

Public finances

           

General government

           

Revenue (excluding grants)

5.1

8.1

10.0

12.1

13.8

14.5

Tax revenue 2/

4.6

6.9

8.8

10.3

12.1

12.7

Nontax revenue

0.5

0.9

1.0

1.3

1.3

1.2

Expenditure (commitment basis)

12.3

13.9

14.5

14.3

16.3

16.6

Current expenditure

10.5

12.9

13.3

12.7

13.8

13.9

Of which: wages and salaries

1.6

1.8

2.3

2.3

2.6

2.7

Capital expenditure and net lending

1.8

1.0

1.2

1.6

2.6

2.7

Overall deficit (-, commitment basis and excluding grants)

-7.2

-5.8

-4.5

-2.2

-2.5

-2.1

Primary balance (-, commiment basis and excluding grants)

-5.7

-4.8

-3.1

-0.8

-1.1

-0.7

Overall deficit (cash basis and including grants)

-4.5

-4.4

-3.8

-2.5

-1.9

-1.6

Financing of Overall deficit (cash basis and including grants)

4.5

4.4

3.8

2.5

1.9

1.6

Domestic financing

1.6

2.7

2.3

1.4

0.8

0.5

External financing (net)

2.9

1.7

1.5

1.1

1.1

1.1

Savings and investments

           

Gross domestic savings

9.8

4.0

2.1

3.7

5.6

6.5

General government 3/

-5.4

-4.7

-3.3

-0.6

0.1

0.6

Non-government sector

15.2

8.7

5.4

4.3

5.5

5.9

Investment 4/

23.9

13.1

12.3

13.8

13.6

14.4

General government

1.8

1.0

1.2

1.6

2.6

2.7

Non-government sector

22.1

12.1

11.1

12.2

11.0

11.8

External current account balance 5/

-14.1

-9.1

-10.2

-10.2

-8.0

-7.9

External and public debt and debt service

           

Public sector external debt, end of year

42.5

29.9

29.2

29.2

29.4

30.2

Of which: external arrears

17.6

3.8

...

...

...

...

Public sector external debt service (after rescheduling)

1.2

1.1

1.0

2.4

2.6

3.1

Of which: interest due

1.2

1.1

0.9

0.8

0.9

0.8

Public sector external debt service/exports of GNFS (percent)

7.3

9.6

8.5

18.9

19.9

22.6

Public sector domestic debt, end of year 6/

2.6

4.3

5.9

6.5

6.5

6.2

Of which: domestic arrears

...

...

...

...

...

...

Gross official reserves

           

(in millions of U.S. dollars)

157

158

173

210

250

290

(in months of imports of goods)

2.7

2.7

2.2

2.3

2.7

2.8

Memorandum items

           

Exchange rate (local currency/U.S. dollar, period average)

1.280

1.252

1.297

...

...

...

Nominal GDP (In millions of U.S. dollars)

2,886

4,572

5,242

5,966

6,600

7,233



1/ Includes resident deposits with commercial banks denominated in foreign exchange.

2/ Includes revenue from special funds. These include the Pension, Employment, Road and Health Funds (the later until August 1997). Privatization revenue is excluded.

3/ Deficit on a commitment basis (excluding external grants) minus government investments.

4/ National accounts statistics suffer from serious methodological problems, including, inter alia, inconsistent adjustments for the informal economy. For 1995, investments of the non-government sector include a significant revaluation of fixed assets following the hyperinflation of 1993/94.

5/ Excluding transfers; (-) means current account deficit.

6/ Includes debt to the National Bank of Georgia.




Table 2. Georgia: Income and Social Indicators
Item
Unit of Measure
Latest Single Year
Prel.
Program Period

1970-75

1980-85

1990-95

1996

1997

1998

1999

2000

Population

in thousands

4,908

5,287

5,411

5,360

5,367

5,376

5,387

5,400

Population growth rate (annual average)

in percent

0.85

0.85

-0.20

-0.94

0.13

0.17

0.20

0.22

Total fertility rate

in percent

69.1

72.6

55.1

...

...

...

...

...

Index of real wages

index

...

...

94.6

50.7

76.7

30.0

25.0

20.0

Consumer price index (period-average)

percent change

...

...

162.7

39.4

7.1

6.5

5.5

4.5

Food price index (period-average)

percent change

...

...

139.9

31.4

4.7

5.5

4.5

4.0

Share of public expenditure

Health

percent of GDP

...

...

...

0.7

1.0

1.2

...

...

Education

percent of GDP

...

...

...

1.2

1.8

1.7

...

...

Social security and welfare

percent of GDP

...

...

...

2.4

3.4

3.3

...

...

Net primary school enrollment rate

percent of age group

99

92.2

79.6

...

...

...

...

...

Immunization rate

Measles

percent under 12 mos.

...

36.4

26.5

...

...

...

...

...

DPT

percent under 12 mos.

...

39.8

36.7

...

...

...

...

...

Life expectancy at birth (years)

Total

years

72

71.6

72.6

...

...

...

...

...

Male

years

68

67.5

68.7

...

...

...

...

...

Female

years

75

75.2

76.1

...

...

...

...

...

Infant mortality rate

per 1,000 live births

32.7

24

14.4

...

...

...

...

...

Under 5 mortality rate

per 1,000 live births

39.3

30.1

17

...

...

...

...

...

Male

per 1,000 live births

44

32.2

19

...

...

...

...

...

Female

per 1,000 live births

34.2

27.9

14.7

...

...

...

...

...

Adult (15-59) mortality rate

per 1,000 pop.

1.7

2.1

1.7

...

...

...

...

...

Maternal mortality ratio

per 100,000 life births

...

22.7

35.4

...

...

...

...

...



Table 3. Georgia: External financing requirements and sources
(In millions of U.S. dollars)

Est.

Projections

1995

1996

1997

1998

1999

2000

External financing requirements

677

856

628

890

687

783

Current account (excluding official transfers)

407

418

535

607

527

572

Of which: Interest due

83

65

44

50

60

66

Amortization

274

90

57

96

99

144

Change in arrears (+ a reduction)

-119

347

21

149

...

...

IMF repurchases and repayments

...

...

...

1

21

27

Change in gross official reserves (+ an increase)

115

1

15

37

40

40

Disbursments: existing commitments

367

330

381

405

41

28

Grants 1/

189

140

188

82

0

0

Loans

103

109

117

247

41

28

Bilateral creditors

11

26

36

173

12

0

Multilateral creditors

92

83

82

75

29

28

of which: EBRD

7

7

18

9

0

0

of which: World Bank

85

77

63

65

29

28

of which: Adjustment lending

75

62

40

20

0

0

of which: project

10

15

23

45

29

28

Private creditors

...

...

...

...

...

...

IMF

75

80

76

75

0

0

Other capital, net 2/

85

90

185

223

160

186

Disbursments: expected new commitments

...

...

...

177

352

392

Grants

...

...

...

110

189

173

Loans

...

...

...

67

163

219

Bilateral creditors

...

...

...

9

77

129

Multilateral creditors

...

...

...

59

87

90

of which: EBRD

...

...

...

37

32

26

of which: World Bank

...

...

...

20

52

63

of which: Adjustment lending

...

...

...

20

25

30

of which: project

...

...

...

0

27

33

Private creditors

...

...

...

...

...

...

IMF

...

...

...

0

0

0

Total identified financing

452

420

566

805

552

606

Debt and arrears rescheduling

225

390

62

85

...

...

Arrears write-off

...

46

...

...

...

...

Financing gap

0

0

0

0

135

177

Source: Fund staff estimates

1/ Includes exceptional macroeconomic assistance from the EU.

2/ Includes changes in commercial banks' net foreign assets, short term capital inflows, foreign direct investment, and errors and omissions.


Table 4. Georgia: Policy Matrix 1998-2000
Policy Area
Objectives and Targets
Strategies and Measures
Implementation
TA Requirements
Fiscal policy and public sector reform        

Revenue

Improve the revenue raising capacity as well as the equity and buoyancy of the tax system

Broaden the actual tax base by improving tax collection, especially from cigarettes and alcoholic beverages

1998

IMF, World Bank

   

Refrain from introducing any ad hoc tax privileges for ailing enterprises, unless in the context of a well-defined restructuring program

1998-2000

 
   

Change to a destination basis through bilateral agreements the VAT and excise taxation for trade with BRO countries

Contingent upon agreement with other CIS countries

IMF

   

Review the existing customs duties and tax exemptions with a view to eliminate them

1998-2000

 
   

Review profit tax and personal income tax

1999

IMF

 

Improve tax administration

Enforce tax legislation and ensure timely payments of tax obligations

1998-2000

 
   

To reduce tax arrears, encourage TIG to increase audits and use its legal powers, such as seizing assets, especially for the largest delinquents

1998

IMF

   

File for bankruptcy tax payers with tax arrears older than nine months

1998

IMF

   

Review progress in reforming the Tax Inspectorate of Georgia (TIG) and establishing new medium-term objectives with technical assistance from the IMF

1998

IMF **, USAID

   

Maintain the functional organization of TIG

1998-2000

 
   

Expand coverage of the Large Taxpayer Unit to cover taxpayers accounting for at least 50 percent of total tax revenues

1998

IMF, USAID

   

Conduct regular taxpayer surveys to identify nonfilers and register them

1998-2000

 
   

Extend computerization to regional tax centers

1998-1999

IMF (1998)**, World Bank, USAID,

   

Following the computerization of VAT declaration forms in 1997, complete the computerization of tax declaration forms for profits, income, and excise taxes

1998

IMF **, USAID, World Bank

 

Improve customs administration

Extend the TINs developed by TIG to all SCD offices

1998

IMF

   

Computerize SCD, implementing the UN’s ASYCUDA system

1998

IMF, UNCTAD, World Bank **

   

Implement effective duty drawback scheme, suspensive regimes and warehousing procedures for firms exporting near all of their production

1998-2000

World Bank**

   

Develop effective procedures for collecting customs duties, VAT, excises, and the cross-border taxes at customs borders

1998-2000

IMF, World Bank**

   

Improve controls on transit goods and on personal imports

1998-2000

 
   

Strengthen controls at all borders with neighboring countries

1998-2000

 
   

Provide technical and management training for tax officials

1998-2000

 

Expenditure and budget control

Improve Expenditure control and management

Expand the treasury system to cover all general government revenue and expenditure accounts (including the accounts of all extrabudgetary funds); complete computerization of all central and regional treasury offices; extend the treasury network to cover the subregional district level; and introduce commitment accounting in the treasury system; and develop a centralized database of all expenditure transactions

1998-2000

IMF, USAID, World Bank**

   

Improve the collection of fiscal data

1998-2000

IMF, USAID, World Bank

   

Improve procedures for budgetary preparation, implementation and monitoring, including forecasting monthly cash flows

1998-2000

IMF

   

Review the expenditure assignments of local governments and transfer mechanisms from central government. Implement recommendations of IMF technical assistance mission

1998-2000

 

Reorient expenditure priorities

Conduct a census of public sector employees

1998

 
   

Review the activities of each ministry

1998

 
   

Implement the recommendations of the World Bank’s Public Expenditure Review

1998-2000

World Bank

 

 

Improve targeting of Social Safety Net and reorient budgetary expenditures toward basic health and education

1998-2000

World Bank

   

Develop a medium-term program to reduce the number of government workers to an efficient minimum and increase the real wages of the most productive employees

1998-2000

World Bank

   

Increase cost recovery and improve collection rates for publicly-provided goods and services

1998-2000

World Bank

 

 

Develop a five-year indicative public investment program, and give priority to the maintenance of the existing capital stock

1998

World Bank**

Monetary policy

Improve NBG operations

Improve the liquidity forecasting framework and establish a committee to coordinate NBG’s credit and exchange rate policy

1998

IMF

   

Expand the range and efficiency of indirect monetary instruments

1998-2000

IMF**, USAID

   

Develop a secondary market for treasury bills

1998

IMF

   

Foster foreign banks’ participation in the domestic financial market

1998-2000

IMF, World Bank

 

Improve banking environment

Reduce required reserve ratio if monetary conditions allow

1998

 
   

Initiate work on a new chart of accounts and financial reporting standards in line with international accounting standards for commercial banks

1998

IMF, World Bank**

   

Modernize the payments system

1998-2000

World Bank, USAID

   

Increase gradually commercial banks’ minimum capital to lari 5 million by December 31, 2000; reduce limit on insider lending from 50 percent to 25 percent of capital effective July 1998; and increase from 10 percent to 15 percent the ratio of total capital to risk-weighted assets effective July 1, 1998

1998-2000

IMF, World Bank

 

Bank restructuring

Carry out regular on-site examinations of all certified banks

1998-2000

IMF**, World Bank

   

Complete liquidation process of banks which had licenses withdrawn

1998

IMF**, World Bank

Private sector Development

Improve legal framework and build the institutions necessary for an efficient development of the private sector

Privatization of 109 medium-scale enterprises through cash auctions and 25 percent of the shares of a group of 50 large-scale enterprises

1998

World Bank**, USAID

   

Privatize urban land, including the introduction of a favorable legal and regulatory framework; the adoption of a condominium law; the continuation of the land privatization process while the registration system on urban and parcels is being developed; and develop a public education campaign to inform citizens about urban land privatization issues

1998-2000

IMF, World Bank, USAID

   

Adopt a new single law on licensing, streamlining the licensing process, and clarifying that only certain specified activities are subject to licensing

1998

 
   

Establish an independent Securities and Exchange Commission

1998

World Bank, USAID

   

Set up and make operational a stock exchange

1998

World Bank, USAID

   

Improve payroll tax collection to gradually lower payroll tax rates while increasing benefits

1998-2000

 

Energy sector

Restore financial balance to the energy sector

Initiate privatization of electricity distribution and generation companies

1998

World Bank**

   

Adjust electricity tariffs to cost recovery level

1998

World Bank

   

Increase to 85 percent the collection rate of electricity payments

1998

World Bank

Transport sector

Restructure sector to serve market needs

Continue privatization of transport enterprises, implement cost recovery mechanisms, and rehabilitate infrastructure

1998-2000

World Bank

Telecommunications sector

 

Prepare, adopt, and implement a strategy for the liberalization and privatization of the Telecommunication sector with assistance from donor community, as necessary

1998

World Bank

Government restructuring

Align structure of government with the needs of the emerging market economy

Review the financial relationship between the different government levels

1998-2000

 

Environment

Reinvigorate protection of Georgia’s environment

Complete National Environmental Action Plan

1998

 

Legal framework

 

Review the enforcement of laws and regulations introduced since the start of the reform; introduce a law on gas and oil production-sharing mechanisms; revise the law on Entrepreneurship; and issue new accounting directives consistent with international standards

1998-1999

World Bank, USAID

Judicial reform

 

Increase capacity to plan, organize, administer, and manage the court system

1998-1999

World Bank

   

Appoint a new cadre of judges; foster human resource development of court personnel

1998-1999

World Bank

   

Develop a plan to disseminate legal information to the judicial system and the public at large

1998

World Bank

Agriculture sector

Develop private sector agriculture

Improve financial services to farmers and develop a modern land registration and land cadastre system

1998-2000

World Bank, EBRD, EU-TACIS

Trade and exchange regime

Liberalize further the exchange and trade systems

Replace the export prohibition on scrap metal with a temporary export tax

1998

World Bank, IMF

   

Remove the export licensing fee on logs and replace it with a license available without charge applicable to all types of wood cutting (i.e., for export and/or domestic use)

1998

World Bank, IMF

   

Eliminate the existing reference price lists for selected imports

1998

World Bank, IMF

External debt

 

Settle arrears in kind to Turkmenistan (on account of gas deliveries in 1995)

1998

IMF

 

Normalize relations with creditors

Negotiate rescheduling in line with program assumptions

1998

 
   

Contract or guarantee no new non-concessional external debt with maturity of 5 years of less and strictly limit contracting or guaranteeing longer-term non-concessional debt

1998-2000

 

Social safety net

Improve targeting and the effectiveness of social safety net

Enhance the administration of the social safety net programs and improve targeting of the most vulnerable groups

1998

IMF, World Bank

   

Conduct quarterly national household surveys

1998-2000

World Bank

Health sector

Continue reform of health care system

Increase budgetary allocation and improve efficiency of public expenditures on health, and assure access for the poor

1998-2000

World Bank

   

Complete privatization of pharmacies and clinics

1998

World Bank

Education sector

Improve efficiency of government expenditures in education within the overall budgetary constraints

Prepare a plan of actions over a five-year period to achieve a 50 percent increase in the ratio of pupil per teaching and nonteaching staff. For general education, the ratio should reach 15 pupils per staff versus the current ratio of 10 to 1. Gradually increase allocations of budgetary resources to education

1998-2000

World Bank

   

Promote creation of private education and training institutions. For vocational/technical and higher education, promote a more efficient and equitable mix of funding by mobilizing sources other than the state budget such as tuition fees, employers contributions, etc.

1998-2000

World Bank

Statistics

Improve quality and timeliness of economic statistics

Improve the quality of the National Producer Price Index and national accounts, compile trade data in value and volume forms, ensure that Department of Statistics data on the capital account is consistent with data of the ministry of finance on debt, implement GFS classification, update business register

1998

IMF, OECD, World Bank, EU-TACIS**

**Extensive technical assistance has been provided in the past.



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