The Executive Board of the International Monetary Fund (IMF) today completed the sixth review of Georgia's economic performance under a Stand-By Arrangement (SBA) for an amount equivalent to SDR 477.1 million (about US$713.8 million) approved on September 15, 2008 (see Press Release No. 08/208). On August 6, 2009, the Executive Board approved an augmentation of access under the SBA to an amount equivalent to SDR 747.1 million (about US$1,117.7 million) and an extension of the SBA until June 14, 2011 (see Press Release No. 09/277). The completion of the sixth review allows for the immediate purchase of an amount equivalent to SDR 50 million (about US$74.8 million). The Executive Board granted a waiver for the nonobservance of the end-June 2010 performance criterion on the floor on the net international reserves of the National Bank of Georgia and a waiver of applicability of the end-June 2010 performance criterion on the ceiling on cash deficit of the consolidated government. The Executive Board also modified the performance criteria for end-September 2010.
After the Executive Board's discussion, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair, said:
"Georgia's economic recovery is gaining strength, backed by steady implementation of the program's economic policies. Nevertheless, risks remain, as evidenced by the recent weakness of FDI inflows and related exchange rate pressures. The authorities' prompt policy response, including faster depreciation and a tightening of monetary and fiscal policies, places Georgia in a good position to meet the objectives of the program, which are to secure macroeconomic stability and growth based on private sector financing and investment.
"The sizeable reduction in the fiscal deficit targeted for 2010-by nearly 3 percentage points of GDP-brings the objective of reaching a fiscally sound position within closer reach. The authorities' adoption of new revenue measures as well as their commitment to cap spending in 2010 is commendable. Moreover, the decision to postpone the implementation of a referendum requirement on tax increases will help maintain the necessary policy flexibility until the fiscal deficit has returned to more prudent levels. The authorities are encouraged to continue their efforts by targeting an ambitious reduction in the fiscal deficit in 2011.
"Bank lending shows signs of recovery, supported by a gradual lowering of lending interest rates over the past year. The tightening of monetary policy in June was warranted and the policy stance should continue to be adjusted promptly to changing market conditions.
"The banking sector's high levels of capital and provisioning continue to provide adequate buffers against adverse shocks, but continued close supervision of banks remains critical".