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Table 1. Georgia: Selected Economic and Financial Indicators, 1995-2000 |
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1995 |
1996 |
1997 |
1998 |
1999 |
2000 |
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Prel. |
Program |
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(Annual percentage change, unless otherwise indicated) |
Output, incomes, and prices |
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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 |
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External sector (in millions of U.S. dollars) |
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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, -) |
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Real effective exchange rate (depreciation, -) |
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Money and credit |
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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) |
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(In percent of GDP, unless otherwise indicated) |
Public finances |
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General government |
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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 |
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Savings and investments |
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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 |
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External and public debt and debt service |
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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 |
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(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 |
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Memorandum items |
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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 |
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Policy Area |
Objectives and Targets |
Strategies and Measures |
Implementation |
TA Requirements |
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| Fiscal policy and public sector reform |
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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 |
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Refrain from introducing any ad hoc tax privileges for ailing enterprises, unless in the context of a well-defined restructuring program |
1998-2000 |
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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 |
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Review the existing customs duties and tax exemptions with a view to eliminate them |
1998-2000 |
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Review profit tax and personal income tax |
1999 |
IMF |
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Improve tax administration |
Enforce tax legislation and ensure timely payments of tax obligations |
1998-2000 |
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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 |
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File for bankruptcy tax payers with tax arrears older than nine months |
1998 |
IMF |
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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 |
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Maintain the functional organization of TIG |
1998-2000 |
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Expand coverage of the Large Taxpayer Unit to cover taxpayers accounting for at least 50 percent of total tax revenues |
1998 |
IMF, USAID |
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Conduct regular taxpayer surveys to identify nonfilers and register them |
1998-2000 |
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Extend computerization to regional tax centers |
1998-1999 |
IMF (1998)**, World Bank, USAID, |
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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 |
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Improve customs administration |
Extend the TINs developed by TIG to all SCD offices |
1998 |
IMF |
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Computerize SCD, implementing the UN’s ASYCUDA system |
1998 |
IMF, UNCTAD, World Bank ** |
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Implement effective duty drawback scheme, suspensive regimes and warehousing procedures for firms exporting near all of their production |
1998-2000 |
World Bank** |
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Develop effective procedures for collecting customs duties, VAT, excises, and the cross-border taxes at customs borders |
1998-2000 |
IMF, World Bank** |
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Improve controls on transit goods and on personal imports |
1998-2000 |
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Strengthen controls at all borders with neighboring countries |
1998-2000 |
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Provide technical and management training for tax officials |
1998-2000 |
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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**
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Improve the collection of fiscal data |
1998-2000 |
IMF, USAID, World Bank |
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Improve procedures for budgetary preparation, implementation and monitoring, including forecasting monthly cash flows |
1998-2000 |
IMF |
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Review the expenditure assignments of local governments and transfer mechanisms from central government. Implement recommendations of IMF technical assistance mission |
1998-2000 |
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Reorient expenditure priorities |
Conduct a census of public sector employees |
1998 |
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Review the activities of each ministry |
1998 |
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Implement the recommendations of the World Bank’s Public Expenditure Review |
1998-2000 |
World Bank |
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Improve targeting of Social Safety Net and reorient budgetary expenditures toward basic health and education |
1998-2000 |
World Bank |
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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
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Increase cost recovery and improve collection rates for publicly-provided goods and services |
1998-2000 |
World Bank |
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Develop a five-year indicative public investment program, and give priority to the maintenance of the existing capital stock |
1998 |
World Bank** |
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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 |
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Expand the range and efficiency of indirect monetary instruments |
1998-2000 |
IMF**, USAID |
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Develop a secondary market for treasury bills |
1998 |
IMF |
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Foster foreign banks’ participation in the domestic financial market |
1998-2000 |
IMF, World Bank |
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Improve banking environment |
Reduce required reserve ratio if monetary conditions allow |
1998 |
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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** |
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Modernize the payments system |
1998-2000 |
World Bank, USAID |
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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 |
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Bank restructuring
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Carry out regular on-site examinations of all certified banks |
1998-2000 |
IMF**, World Bank
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Complete liquidation process of banks which had licenses withdrawn |
1998 |
IMF**, World Bank
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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 |
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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 |
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Adopt a new single law on licensing, streamlining the licensing process, and clarifying that only certain specified activities are subject to licensing |
1998 |
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Establish an independent Securities and Exchange Commission |
1998 |
World Bank, USAID |
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Set up and make operational a stock exchange |
1998 |
World Bank, USAID |
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Improve payroll tax collection to gradually lower payroll tax rates while increasing benefits |
1998-2000 |
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Energy sector |
Restore financial balance to the energy sector |
Initiate privatization of electricity distribution and generation companies |
1998 |
World Bank** |
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Adjust electricity tariffs to cost recovery level |
1998 |
World Bank |
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Increase to 85 percent the collection rate of electricity payments |
1998 |
World Bank |
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Transport sector |
Restructure sector to serve market needs |
Continue privatization of transport enterprises, implement cost recovery mechanisms, and rehabilitate infrastructure |
1998-2000 |
World Bank
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Telecommunications sector |
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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 |
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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 |
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Environment |
Reinvigorate protection of Georgia’s environment |
Complete National Environmental Action Plan |
1998 |
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Legal framework |
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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
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1998-1999 |
World Bank, USAID |
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Judicial reform |
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Increase capacity to plan, organize, administer, and manage the court system |
1998-1999 |
World Bank |
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Appoint a new cadre of judges; foster human resource development of court personnel |
1998-1999 |
World Bank |
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Develop a plan to disseminate legal information to the judicial system and the public at large |
1998 |
World Bank |
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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 |
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Trade and exchange regime |
Liberalize further the exchange and trade systems |
Replace the export prohibition on scrap metal with a temporary export tax
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1998 |
World Bank, IMF |
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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 |
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Eliminate the existing reference price lists for selected imports |
1998 |
World Bank, IMF |
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External debt |
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Settle arrears in kind to Turkmenistan (on account of gas deliveries in 1995) |
1998 |
IMF |
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Normalize relations with creditors |
Negotiate rescheduling in line with program assumptions |
1998 |
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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 |
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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 |
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Conduct quarterly national household surveys |
1998-2000 |
World Bank |
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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 |
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Complete privatization of pharmacies and clinics |
1998 |
World Bank |
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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 |
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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
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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**
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