IMF approves $113.9 mln under Extended Fund Facility programme to support Georgia amid pandemic

The International Monetary Fund (IMF) Executive Board has completed the Seventh Review of Georgia’s economic reform programme supported by a four-year extended arrangement under Extended Fund Facility (EFF) and approved a disbursement of $113.9 million to help the Georgian economy amid Covid-19 shocks.

Georgia faces a pronounced economic slowdown due to the COVID-19 pandemic. Despite the successful containment of the first wave of the pandemic, the recent rise in cases has required new measures that could weaken the recovery. Risks are large and mostly to the downside,” said Tao Zhang, IMF Deputy Managing Director and Chair.

He noted that the National Bank of Georgia has appropriately maintained a moderately tight monetary stance to anchor inflation expectations, while safeguarding the exchange rate flexibility.

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The tight monetary policy stance and continued foreign-exchange intervention may need to be sustained to prevent disorderly market conditions and bring inflation towards the 3-percent target. Macroeconomic policy discipline and donor support is expected to keep foreign exchange reserves at an adequate level. The proactive monitoring of financial risks and actions to preserve banks’ capital until the economy rebounds would support the recovery,” he noted.

Zhang also said that the fiscal response to the pandemic has helped alleviate its adverse economic and social impact, with higher healthcare spending, targeted and temporary support to households and businesses, and sustained public investment.

• IMF ready to help Georgia overcome coronavirus crisis

The 2021 Budget will further support the economic recovery while starting fiscal consolidation consistent with Georgia’s fiscal rule. The authorities’ proactive monitoring of fiscal risks stemming from power purchase agreements and state-owned enterprises are expected to help safeguard debt sustainability. Plans to reform state-owned enterprises will help to improve the efficiency of the public sector,” noted IMF Deputy Managing Director and Chair.

He noted that the decisive implementation of structural reforms is critical to support the recovery and limit scarring from the COVID-19 shock.

Mobilizing investment, advancing education reform, implementing the new insolvency framework, developing the local capital market, and judiciary reforms would further improve the business environment and support the private sector–led growth,” he said.

After the allocation of $113.9 million, total disbursements for Georgia under the programme will be amounted to $585.4 million.