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4th review of the IMF


4th review of the IMF


On May 13, the IMF concluded a service-level agreement with Georgia for the fourth review of EFF, an Extended Credit Facility. This review foresees, if approved by the Board of Directors during the session scheduled for the end of June 2019, a disbursement of SDR 30 million (approximately US $ 41.6 million), or US $ 207 million cumulatively since the end of June 2019, beginning of the program. The IMF team shared its findings and recommendations at a donor meeting from which it emerged from the IMF's desire that Georgia deepen and truly implement the reform agenda, particularly that of education.


The team of the International Monetary Fund, in charge of discussing the 4th review of the program, was led by Ms. Mercedes Vera Martin. The program supports the government's reform agenda that aims to reduce economic and financial vulnerabilities and generate stronger and more inclusive growth.

After the negotiations, the head of mission organized a meeting with the donors to exchange the state of discussions between the Georgian authorities and the IMF. Broadly speaking, the reform agenda remains on track, with most of the fourth review's commitments being achieved with the exception of 3 structural benchmarks (deadline for publication of the report on PPP commitments and the concentration of these commitments). indexation of public pensions, safeguards on suspicious banking).


The IMF has reached an agreement at the service level for the fourth review of the EFF program with Georgia, which will be submitted to the Executive Board at the end of June 2019. The preliminary conclusions of the mission are:

  • GDP growth was 4.7% in 2018 and is expected to remain stable in 2019 with a growth forecast of 4.6%; inflation has remained close to the Central Bank's target and is forecast at 4.5% in 2019 through an expected increase in the excise tax. The IMF expects it to return to the target in early 2020.
  • Strong growth in exports, tourism receipts, migrant remittances, and moderate import growth helped reduce the current account deficit to 7.7 percent of GDP from 8.8 percent of GDP in 2017 The public debt is at 45%.
  • Budget results in 2018 were in line with the deficit targets, partly due to an acceleration of spending in December 2018. This allowed Georgia to meet its fiscal targets but a reshaping of this target and its spread over time will be proposed by the IMF. Revenues, better than expected, supported higher capital expenditures and lending, while current expenditures were contained.
  • in the medium term, structural reforms and investments in infrastructure will be essential to continue to support stronger and more inclusive growth; a prioritization of infrastructures will nevertheless have to lead to more targeting of public investments;
  • Georgia remains vulnerable to external developments. This requires the maintenance of exchange rate flexibility, continued accumulation of reserves, prudent monetary and fiscal policies, and sound financial sector policies.


Despite a weaker global outlook, preliminary data point to robust growth in the first quarter of 2019. Growth is expected to reach 4.6% in 2019, the highest rate in the region, but still insufficient for needs, with inflation above the target of 3%, mainly reflecting the increase in excise and customs duties on tobacco. According to the IMF, structural reforms and infrastructure investments should gradually bring growth to a potential level unchanged at 5.2% over the medium term. The current account deficit is expected to gradually decline in the medium term as a result of the improvement in the trade balance.

While these prospects are positive, Georgia remains vulnerable to external events, including rising global trade tensions, US-Iran tensions and volatile financial markets. A slowdown in credit, following the implementation of a policy of "responsible lending" by the Banks, greater than expected could have an impact on growth in the short term.

The growth dynamic offers the authorities an opportunity to continue and persevere in the reform agenda, while continuing to build up reserves to cope with the negative impacts of external shocks.

The budget deficit will remain relatively stable in 2019 in the following years, but the composition of expenditure is expected to change to reflect the new priorities for the implementation of education reform. The IMF supports the Georgian authorities' willingness to implement their education reform plan within the existing budget envelope of 1.2% of GDP (half of which is spent on educational infrastructure current expenditure). In addition, the authorities are working to further improve the revenue administration, the priority management of public investments and the monitoring of state-owned enterprises (SOEs) in order to limit budgetary risks. The work on the SOEs must be continued and Georgia will present, before the end of 2019, a clear situation on the market framework of the activities of these companies with the objective of stopping capital injections. In this context, the authorities also propose to review the mandate of the Partnership Fund so that it can, in particular, expand its capital investment activities, as its revenues have declined.

Monetary policy remains focused on price stability and the stance of monetary policy is appropriate. The IMF notes a continued commitment by the authorities to exchange rate flexibility and foreign exchange reserves.

Financial sector reforms should continue to focus on strengthening financial resilience. As expected, Central Bank regulations, recently adopted by banks to introduce "responsible lending", have tightened lending standards and slowed household credit growth. This should help make credit growth more predictable, but must be balanced by improved access to credit for creditworthy borrowers. The strengthening of access standards for emergency cash assistance has been improved, which strengthens the framework for resolving bank failures.

According to the IMF, continued structural reforms and the real implementation of the reform agenda will foster private sector-led growth, create jobs and promote more inclusive and re-distributive growth. In particular, a thorough reform of education will be essential to improve skills and reduce unemployment. The legal framework for future corporate insolvency and capital market reform would help drain investments, including foreign investments, which the Fund expects at a low level in the near term. The IMF therefore encourages the authorities to continue, deepen and implement the reforms.

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