IMF: Georgia’s economy stable but faces ongoing risks
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Georgia has weathered several shocks but the country still faces a number of challenges, says a report published by the International Monetary Fund (IMF).
An IMF mission came to Georgia in June 2014 to learn about the stability of the country’s financial system, but presented their final results to the National Bank of Georgia (NBG) three days ago in its latest paper.
The research was revealed in the Financial System Stability Assessment for Georgia, which has been published five times earlier, in December 2014 and January 2015.
The latest paper, presented to NBG president Giorgi Kadagidze on Friday, stated Georgia’s economy had withstood several nearby incidences which could have had serious effects, such as the Russian conflict, the global financial crisis and domestic political uncertainty.
"Significant steps have been taken to strengthen banking regulations and supervision, which exhibit a very high degree of compliance with international standards. NBG has also introduced an advanced risk-based supervisory regime while maintaining a conservative approach aimed at detecting vulnerabilities at an early stage, and allocating supervisory resources in the most efficient and effective manner,” said the paper.
IMF said the Georgian banking sector was stable and had continued to perform well, but there were still a number of key risks and vulnerabilities that needed to be closely monitored. Of the concerns, particular challenges were credit and funding risks related to the dollarisation, concentration in the banking sector and reliance on nonresident deposits, noted the paper.
"There are two major dollarisation-related problems: Firstly, most of the borrowers in US dollars (USD) are unhedged, as their income and expenditures are in the national currency (this is especially evident in case of households),” read the paper.
"Secondly, NBG has a limited ability to provide liquidity support in USD and other foreign currencies. However, it should be noted that the NBG is implementing a set of macro-prudential measures aimed at making FX lending more expensive for banks,” said the paper.
NBG president Kadagidze said the IMF paper was very important for Georgia.
"This is a message for investors and international financial organisations that there is a developed, sustainable and reliable financial sector in Georgia.
"This paper once again proves the progress and success of the systematic changes that the National Bank of Georgia and the whole financial sector have performed in recent years,” Kadagidze said.
The Georgian economy should be comprehensively evaluated in light of the recent economic hardship and the external factors that are affecting the economy should be adequately reviewed, says Azim Sadikov.
Georgia is taking action to tackle the effects of the recent economic developments.
Georgia’s Finance Minister Nodar Khaduri is on an official visit to Washington, D.C. to take part in the International Monetary Fund (IMF) and the World Bank Group annual spring meetings.
International Monetary Fund (IMF) official and Georgia’s National Bank President met in Georgia’s capital Tbilisi today to discuss the current situation in the region and the major factors that have influenced the country’s national currency exchange rate.
Georgia’s national currency, the Lari, is beginning to stabilise since it began dropping in value against the US dollar about seven months ago. Meanwhile in the past three days the Lari has strengthened slightly.
The national currency of Georgia, the Lari (GEL), is continuing to strengthen against the US dollar and the Euro after falling dramatically about seven months ago.
The Georgian Government and the World Bank have signed two financial agreements on an IBRD (International Bank for Reconstruction and Development) loan of $120 million USD to develop the country’s private sector, raise competitiveness and foster inclusive growth.
Georgia’s developing agricultural sector, growing export trends and reputation as a top tourism destination is having a positive effect on the country’s growing economy, says the country’s Prime Minister.
Reducing Georgia’s dependency on the US dollar and maintaining a floating exchange rate are two recommendations offered by the International Monetary Fund to Georgia.