Typical street scene in Santa Ana, El Salvador. (Photo: iStock)
IMF Survey: IMF and Georgia Discuss $750 Million Loan Package
September 3, 2008
- IMF mission reaches agreement in principle with Georgia
- Loan would help Georgia recover after recent conflict
- Aim to rebuild investor confidence, revive private capital flows
Following a request by the Georgian authorities for IMF financial support, an IMF mission visited Tbilisi August 23-September 3 and has reached an agreement in principle on a $750 million financial package.
Rail terminal at Poti, Georgia: proposed loan intended to help mitigate adverse effects of recent conflict, IMF says (photo: Alexander Klimchuk/Itar-Tass)
STAND-BY LOAN
The proposed arrangement requires the approval of the IMF Executive Board, which is expected to consider Georgia's request in mid-September.
The loan would be provided through an 18-month Stand-By Arrangement. The arrangement is intended to support the economic policies of the Georgian authorities and to help mitigate the adverse economic and financial consequences of the recent conflict, said David Owen, head of the IMF mission team that visited Georgia to discuss the financing.
Rebuilding confidence
Georgia's strong record of reform and sound macroeconomic policies has strengthened the resilience of the economy and bodes well for a solid recovery from this shock.
The main objectives of the Stand-By Arrangement are to cover part of the expected temporary external financing gap, and to help sustain the confidence of markets and investors by supporting policies that will ensure continued macroeconomic stability and promote the recovery of private sector investment and economic growth, the IMF said in a statement released in Tbilisi.
Strong performance
Before the conflict erupted, Georgia had seen strong economic growth.
"Georgia has followed sound macroeconomic and financial sector policies, notably in the context of the IMF-supported program under the Poverty Reduction and Growth Facility that ended in September 2007," said IMF First Deputy Managing Director John Lipsky in a statement last month voicing concern about the impact of the conflict and tragic loss of life.
"The Georgian authorities also have implemented wide-ranging economic reforms that have strengthened the financial sector and greatly improved the business climate, resulting in rapid economic growth. At the same time, Georgia's international reserves have increased substantially."
Prime Minister Lado Gurgenidze thanked the IMF for its very rapid response to Georgia's request and the unprecedented support demonstrated in terms of very large access. He said during a news conference that an IMF-supported arrangement would be a big step forward in showing policy trustworthiness and should encourage investors to continue investing in Georgia.
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