IMF financing of $450 mln to help Georgia contain COVID-19 pandemic, limit its economic impact

The International Monetary Fund (IMF) is offering $450 million to help Georgia contain the COVID-19 pandemic and limit its economic impact, announces the IMF.

• Donor organisations to provide $1.5 billion to Georgia in 2020

The IMF reached an agreement with the Georgian authorities for the completion of the Sixth Review and an augmentation of access under the Extended Fund Facility. 

The team will recommend an increase in IMF support to Georgia by 130 per cent of the quota (about $375 million) to help finance health and macroeconomic stabilisation measures, meet urgent balance of payments needs arising from the COVID-19 pandemic, and catalyse support from the international community. The disbursement associated with this review (about $200 million) will be allocated for budget support to help the authorities meet urgent medical and socio-economic needs, to be disbursed with the completion of this review", said the mission Chief for Georgia at the IMF Mercedes Vera-Martin.

She said that the agreement is subject to approval by the executive board. Consideration by the executive board is expected in early May. 

With the financing available to Georgia upon completion of the review, total disbursements under the EFF arrangement will amount to 155 percent of quota (at about $450 million)", said Vera-Martin.

She also made a statement about the economic outlook of Georgia and said that with the Covid-19 pandemic, the outlook has "significantly deteriorated".

Real GDP is expected to decline by 4 per cent in 2020, although projections are subject to more than the usual uncertainty. Deteriorating trade, halted tourism, and weaker remittances are expected to widen the current account deficit to 11⅓ per cent of GDP in 2020. Rising global risk aversion is likely to reduce private financial inflows and delay investment. Urgent balance-of-payments needs rising from the Covid-19 shock are estimated at about $1.6 billion in 2020-21, to be financed by IMF financing and other donor assistance", Vera-Martin said.

Vera-Martin praised the efforts of the Georgian government and said that the authorities have taken "decisive steps" to contain the COVID-19 pandemic. 

 In her opinion prudent macroeconomic policies, the buildup of fiscal and foreign exchange reserves in recent years, a well-capitalised financial system, and significant financial donor support make the Georgian economy prepared to address the shock.