IMF Executive Board Completes the Sixth Review under the Extended Fund Facility and Approves the Request for Augmentation of Access to Support Georgia Address the COVID-19 Pandemic
The IMF Executive Board of the International Monetary Fund (IMF) completed today the Sixth Review of Georgia’s economic reform program supported by a three-year extended arrangement under the Extended Fund Facility (EFF). The IMF Executive Board also approved an augmentation of access of 130 percent of quota, bringing total access under the EFF to SDR484 million (230 percent of quota).
The completion of the review will release SDR147 million (about $200 million) for budget support, to help Georgia meet urgent balance of payments and fiscal needs stemming from the COVID-19 pandemic, including increased spending on health services and social protection. Total disbursements so far under the arrangement amount to SDR327 million (about $448 million).
In completing the review, the IMF Executive Board also approved the authorities’ request for a waiver of nonobservance for the performance criteria on the ceiling on the augmented general government deficit.
The pandemic is expected to have a significant impact on Georgia’s economy, interrupting the positive economic trajectory of past years. The weakened macroeconomic outlook and fiscal situation have created urgent external and fiscal financing needs. The IMF financial support will make a substantial contribution toward fulfilling the needed increases in health spending and social safety nets.
Following the Executive Board discussion, Mr. Tao Zhang, IMF Deputy Managing Director and Chair, made the following statement:
“The COVID-19 pandemic has hit the Georgian economy hard. A drop in external demand and tourism has widened the current account deficit, led to a depreciation of the exchange rate, and a substantial decline in economic activity. The authorities have acted rapidly by introducing sweeping containment measures and targeted support to households and to most affected sectors.
“The fiscal deficit has increased, and external financing has been mobilized to allow for additional spending. While increased public spending is necessary, vigilance is needed to safeguard debt sustainability, particularly against fiscal risks arising from state-owned enterprises.
“The National Bank of Georgia has appropriately maintained a moderately tight monetary policy stance, while allowing exchange rate to remain flexible. Monetary policy decisions should be based on close monitoring of inflationary expectations.
“Advancing structural reforms would help sustain medium-term growth potential and achieve a faster recovery after the pandemic. Adopting the indexation rule for public pension would contribute to sustain the income of pensioners. Completing the banking resolution framework and implementing the insolvency framework would help support the recovery.
“The augmentation of access under the Extended Fund Facility arrangement should support the authorities’ policies to address the COVID-19 shock and help meet the urgent balance-of-payments need.”