Georgia discusses credit guarantee reform with IMF

The International Monetary Fund (IMF) will team up with Georgia’s Ministry of Economy to create a credit guarantee fund for Georgia.

The Credit Guarantee Mechanism, initiated by Georgia’s Economy Minister Dimitri Kumsishvili, is a guarantee fund that comes as a guarantor for loans of small and medium-sized businesses to be received from commercial banks.

It makes it easier for small and medium businesses to access financing which will give a significant boost to economic growth.

We asked the International Monetary Fund full support in setting up a credit guarantee fund. The IMF will work together with us in this direction and I am sure that we will receive quite a good result”, said Kumsishvili after the meeting with the Managing Director of the IMF Tao Zhang in the US.

Tao Zhang at the meeting with First Vice PM Kumsishvili: #Georgia is making progress in implementing reforms supported by the IMF. Accelerating reforms will help the country promote higher and more inclusive growth. pic.twitter.com/HstUBtHHN7

— IMF (@IMFNews) May 22, 2018

The meeting was held yesterday during the Georgian governmental delegation’s visit to the US.

On the other hand Zhang talked about Georgia's economic development in both sectoral and fiscal sectors.

We are very delighted that Georgia has good results in economic growth and in terms of reforms. We have reiterated at this meeting [our intention] to continue working with them in order to achieve [our] goals and of course, we wish Georgia and the Georgian people the best”, Zhang said.

Meanwhile, IMF Resident Representative Francois Painchaud told Agenda.ge that a Credit Guarantee Fund to support lending to SMEs could provide benefits to Georgia, but it also poses challenges. 

Such a fund should therefore be designed carefully. Any such initiative should be market based, targeted, easy to dismantle in the future, and incorporated transparently in the budget. Further specifics, including the size of the fund, its sectoral allocation and the risk assessment process, need to be formulated before the IMF can evaluate it. We look forward to discussions with the authorities as they advance with their proposal”, Painchaud said.