IMF Launches New Credit Facility in Georgia
05 April, 2012
IMF Launches New Credit Facility in Georgia

The International Monetary Fund directs a new USD 387 million credit to Georgia. The International Monetary Fund (IMF) has reached an agreement with Georgian Government on a 24-month Standby Arrangement (SBA) and Standby Credit Facility (SCF) in support of the government’s economic and financial program for 2012–13. 

The staff-level agreement will be submitted to the IMF Executive Board for its consideration on April 11, 2012.  Under the arrangement, which the authorities intend to treat as precautionary, Georgia will be able to access

IMF credit of up to USD 387 million evenly divided between the SBA and the concessional SCF. The proposed arrangement follows the successful completion of the 33-month SBA that expired on June 14, 2011 and disbursed around USD 893 million.

“The objectives of the Stand-By Arrangement that expired in June 2011 were largely achieved. Policies under the program contributed to stabilizing the economy and restarting economic growth, and then to promoting fiscal adjustment and enabling a return to private market financing. Performance in 2011 was stronger than originally envisaged, with growth reaching 7%, inflation converging to the low single digits, government debt falling to 34% of GDP, and international reserves increasing to USD 2.8 billion,” Edward Gardner, the IMF  Mission Chief for Georgia and Senior Resident Representative, said on March 28 in Tbilisi.

He also mentioned that despite these achievements, the unsettled external environment has increased vulnerabilities. At this juncture, the economic outlook for 2012 remains relatively favorable, with growth projected to slow to 6% and inflation remaining subdued. However, access to IMF resources would become available under the program in the event of a significant worsening of external economic and financial conditions.

The upcoming program’s objectives are to rebuild fiscal buffers, promote external adjustment, strengthen market confidence, and catalyze continued official financial support. Fiscal adjustment, a flexible exchange rate, and monetary policy dedicated to price stability will be the key macro policy underpinnings of the program. The fiscal deficit is targeted to decline to 3.5% of GDP in 2012 and to 3% in 2013, consistent with a steady reduction of the government debt ratio.

Medium-term challenges remain, notably in terms of lowering the current account deficit (11.5% of GDP in 2010) and reducing unemployment (16.3% in 2010).

“To address these challenges, sound macroeconomic policies and strong business environment policies will be complemented with sector policies to encourage private investment and education and training reforms to improve labor-market skills,” Gardner stated.

Dimitri Gvindadze, Minister of Finances of Georgia, finds the IMF new program launch positive although claims that government does not intend to spend the money allocated in frames of the new program since there is no need at the moment.

“About USD 387 million will be available to us but we will not spend it for there is no need for it. We have budgetary incomes and will spend it if it is necessary,” Gvindadze said adding that the previous program launched in fall of 2008 was completed successfully and all fiscal and monetary-credit parameters achieved.

“Now we launch a new 2-year program   that will insure dialogue between us and the IMF, otherwise this is a framework through which we implement a dialogue,” Georgian finance minister elaborated.


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