IMF Supports Allocation of $ 41.4 Million for Georgia

The Executive Board of the International Monetary Fund (IMF) completed the Fourth Review of Georgia’s economic reform program supported by a three-year extended arrangement under the Extended Fund Facility (EFF) on June 19 and will release SDR 30 million (about $41.4 million), bringing total disbursements under the arrangement to SDR 150 million (about $207.2 million).

The information was published on the IMF website on June 20.

The Executive Board approved the extended arrangement for SDR 210.4 million (100 percent of quota) on April 12, 2017.

Following the Executive Board meeting, it was concluded that Georgia’s economic performance remains robust with resilient growth, inflation under control, and reduced external vulnerabilities.

The Executive Board also stated that the continued implementation of the authorities’ reform agenda remains vital to ensure that growth is sustainable and inclusive.

“A comprehensive education reform needs to boost education quality and reduce skills mismatches in the labor force,” the IMF added.

David Lipton, First Deputy Managing Director and Acting Chair of the IMF Executive Board stated Georgia’s economic performance remains robust with resilient growth, inflation under control, and reduced external vulnerabilities.

“Although the outlook is favorable, the authorities need to be prepared to address any negative spillovers from external developments and persevere with structural reforms to promote higher and more inclusive growth,” he said.

He also said the fiscal deficit is projected to remain relatively stable in 2019 and over the medium term reflecting the authorities’ commitment to financial sustainability.

“Higher spending on public education will be offset with slower growth in infrastructure investment. Regarding education spending, salary increases can only be effective if accompanied by other steps to boost education quality, which requires further work on comprehensive education reform,” David Lipton said.

First Deputy Managing Director also noted that monetary policy in Georgia is rightly focused on price stability.

“As recent increases in inflation are driven by temporary factors, a neutral monetary policy stance remains appropriate. Tighter lending standards have slowed credit growth as expected, making credit growth more sustainable. The inflation-targeting framework, combined with exchange rate flexibility, and interventions that help build reserves continue to serve Georgia well,” he said.

Lipton underlined the Georgian authorities’ energy market reforms could improve market competition and energy efficiency, adding sound policies and further changes under the IMF program will help preserve the gains made, strengthen economic resilience, and foster stronger and more inclusive growth.”

In its report, IMF says the economic performance in Georgia remained robust in 2018 and growth reached 4.7 percent, supported by external demand, inflation stayed below the three percent target, the fiscal deficit remained in line with program commitments, and the current account improved.

It added in early 2019, growth conditions were favorable, with average inflation slightly above the target reflecting increased excises.