Oranges on sale in Georgia: the economy is expected to rebound. (photo: Newscom)
Stand-By arrangement
"The Fund has approved an 18-month $750 million Stand-By Arrangement to make significant resources available to replenish international reserves and bolster investor confidence, with the aim of sustaining private capital inflows that have been critical to Georgia's economic growth in recent years," said Takatoshi Kato, IMF Deputy Managing Director.
"In addition to Fund resources, Georgia is expected to receive financial assistance from multilateral and bilateral donors and creditors in support of the reconstruction effort," he added.
An amount equivalent to SDR 161.7 million ($250 million) will be made available immediately, with the remaining balance distributed in six installments over the next 18 months, the IMF said in a press release.
Economy well placed to recover
Georgia's near-term growth prospects have been hit by the armed conflict in August 2008, but the economy is well placed to recover from the shock.
The impressive record of adjustment and reform over recent years has strengthened the structure of the economy and its ability to deal with the economic consequences of the shock. Before the conflict, economic growth reached double digits, with inflation around 10 percent. The external current account deficit reached 20 percent of GDP in 2007 and was fully financed by private capital inflows, in particular foreign direct investment.
Recent events have led to pressures on Georgia's capital account, reflected in a decline in international reserves, a fall in bank deposits, and increased Eurobond spreads.
The program is designed to make significant resources available in order to replenish international reserves and bolster investor confidence, with the aim of sustaining private capital inflows that have been critical to Georgia's growth performance in recent years.
Comments on this article should be sent to imfsurvey@imf.org
