IMF Executive Board Completes Fourth Review of Georgia's PRGF Arrangement and Approves US$20.7 Million DisbursementPress Release No. 06/209
September 29, 2006
The Executive Board of the International Monetary Fund (IMF) completed today the fourth review of Georgia's performance under the three-year program supported by the Poverty Reduction and Growth Facility (PRGF). In completing the review, the Board approved the authorities' request for a waiver for the nonobservance of the end-March 2006 structural performance criterion on the establishment and population of a database of all central government Legal Entities of Public Law.
The Executive Board approved the PRGF arrangement on June 4, 2004 (see Press Release No. 04/107) for an amount equivalent to SDR 98 million (about US$145 million). Completion of this review will enable Georgia to draw the equivalent of SDR 14 million (about US$20.7 million), bringing total disbursements under the arrangement to the equivalent of SDR 70 million (about US$103.6 million).
Following the Executive Board discussion of Georgia's economic performance, Mr. Takatoshi Kato, Deputy Managing Director and Acting Chair made the following statement:
"Georgia's economy continues to perform well under the PRGF-supported program, bolstered by improvements in governance and the business environment, a fiscal turnaround that has enabled the government to clear most of the arrears accumulated in previous years, and a bold liberalization of the trade regime.
"The authorities have made impressive progress in structural reforms, and further efforts are underway in the financial and fiscal areas. In view of the rapid credit growth, financial sector reform is crucial for safeguarding the stability of the banking sector, including the authorities' plan to improve fit and proper legislation, in line with best international practices, and the adoption of AML-CFT legislation. Reforms to fiscal administration include the planned consolidation of tax and customs administration and the financial police, to enhance the predictability and efficiency of revenue administration and the quality of taxpayer services.
"The authorities' economic program for the rest of 2006 and 2007 aims to bring inflation back into single digits. In this regard, the government plans to limit demand pressures and money growth, in order to preserve hard-fought gains and avoid the entrenchment of inflationary expectations. Under the 2007 budget, the fiscal deficit will be reduced to just over 2 percent of GDP, and the National Bank of Georgia will limit interventions in the foreign exchange market to smoothing short-term fluctuations, making price stability the governing objective of its policies. Going forward, the government and the central bank should, if necessary, be ready to tighten fiscal and monetary policies beyond the levels now envisaged.
"In order to make structural reform a long-term success, the authorities will focus on sustaining recent reform efforts by strengthening institutions. With the privatization proceeds largely coming to an end in 2007, policies will also focus on mobilizing new and sustainable sources of financing," Mr. Kato said.