Georgia will receive another $ 113.9 million from IMF
By Natalia Kochiashvili
Friday, December 18
The Executive Board of the International Monetary Fund (IMF) has completed the 7th review of Georgia's economic reform program, after which approximately $ 113.9 million will be made available to Georgia.
According to the IMF, this will help Georgia meet the immediate balance of payments needs created by the COVID-19 pandemic and fund increased health and social care costs. According to the IMF press release, “after this write-off, Georgia's total write-off will be about $ 585.4 million.”
According to Tao Zhang, Deputy Managing Director of the IMF, “Georgia's economy has slowed sharply due to the pandemic. Despite the successful containment of the first wave of pandemics, the recent increase in cases has called for new measures that could weaken the recovery process. The risks are great and, for the most part, negative.”
According to him, the National Bank of Georgia has maintained a moderately strong monetary position to meet inflation expectations and, at the same time, ensured exchange rate flexibility. Inflationary pressures decreased as the difference between potential and actual output widened and the nominal effective exchange rate stabilized. Strict monetary policy and foreign exchange interventions may be necessary to prevent the market from malfunctioning and to approach the 3% inflation target. With macroeconomic policy discipline and donor support, foreign exchange reserves will be maintained at an adequate level.
"Proactive monitoring of financial risks before the recovery of the economy and actions aimed at maintaining bank capital will contribute to the recovery of the economy."
Tao Zhang said that structural reforms convincing implementation importance of economic growth will help reduce the loss caused by: "investments, education reform implementation, a new framework for the implementation of the local capital market development and the reforms will improve the business environment and promote growth where the leading private sector will be.
The Board of Directors of the IMF approved the updated macroeconomic parameters of Georgia. According to the new forecast, the Georgian economy will grow by 4.3% in 2021, which is 0.7 percentage points less than the forecast presented in October. The updated macroeconomic parameters also take into account the increased debt size agreed with the Government of Georgia. In 2021, the budget deficit of Georgia is set at 7.5%.
Zhang also said that Georgia needs to pursue structural reforms, including the management of state-owned enterprises, to reduce the negative risks to the state budget from these companies.
The fiscal response to the pandemic has helped mitigate the damaging economic and social consequences of this challenge, increase healthcare spending, targeted and temporary assistance to households and businesses, and maintain capital investment. The 2021 budget will continue to support economic recovery. "Proactive monitoring of fiscal risks by the government stemming from electricity procurement contracts and state-owned enterprises will help debt sustainability. The state-owned enterprise reform plan will improve public sector efficiency," said the IMF Deputy Managing Director.
The loss of state-owned enterprises in 2019 amounted to GEL231 million. In 2018, their loss was GEL816 million.
As of November 30, 2020, Georgia's foreign exchange reserves amount to $ 3.75 billion. The volume of reserves has decreased by $ 180 million compared to August of this year- its peak period, due to foreign exchange interventions carried out by the NBG. In 2020, the National Bank of Georgia conducted 25 foreign exchange interventions to mitigate the fluctuations of the GEL exchange rate, as a result of which $ 843 million was sold.
