Georgia Confident Over New IMF Programme, Says Minister

Georgia expects to agree a new funding programme with the International Monetary Fund as it seeks to reform its economy and attract more foreign investment, the country’s economy minister said Reuters reported.

The IMF started a two-week mission to the former Soviet republic on Feb. 15 after a three-year standby arrangement lapsed.

Georgia, through which pipelines carry Caspian oil and gas to Europe, has been hit by a decline in exports, a plunge in the currencies of its main trade partners and a strengthening of the dollar. The economy expanded by 2.2 percent last year, down from 2.8 percent in 2015.

Minister Giorgi Gakharia said he expected growth to bounce back this year.

“We have all preconditions (in place) to reach 4 percent economic growth this year, although we will be aiming at 5.2 percent, which is the World Bank’s projection,” he told Reuters in an interview.

He said the main economic challenges for Georgia were a rising current account deficit and the economy’s high level of dollarisation, which stood at around 70 percent.

Gakharia said that “pension reform, reform of capital markets, other structural reforms” were among issues authorities were discussing with the fund’s representatives.

“We are not in need of funding right now… (But) I’m sure that we will agree with the IMF on a new programme, which is a good signal for investors as well as international financial institutions,” he said.

Worth $136 million, the standby deal had been due to run until July, but it lapsed with 20 percent of the funds unpaid after disagreements over fiscal sustainability issues and banking supervision.

Georgia’s budget deficit is widely expected to have exceeded the IMF’s recommended ceiling of 3 percent of GDP last year. The Fund has projected a gap of 4.7 pct in 2016 and an even wider one in 2017.

The trade deficit rose 40 percent in 2016, but that rate slowed to 5 percent year on year in January.

Gakharia forecast foreign direct investment of about $1.5 billion (1 billion pounds) this year.

That would be roughly on a par with 2016. In the first nine months of last year, FDI rose 5 percent to $1.298 billion, with Azerbaijan the biggest investor and the transport and communications sectors the biggest beneficiaries.

Gakharia said consumer price inflation — which rose to 3.9 percent year on year in January from 1.8 percent in December – might exceed 4 percent this year.

“(But) I don’t think that inflation will reach a level that affects demand and impedes economic growth,” he added, without specifying what that level might be.

Central bank head Koba Gvenetadze told Reuters last week he expected inflation to be above the bank’s 4 percent target rate in 2017. (cbw.ge)