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Georgia: Fifth Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility and Request for Waiver of a Performance Criterion Informational Annex

Author(s):
International Monetary Fund
Published Date:
March 2007
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Annex I. Georgia: Fund Relations

I. Membership Status: Georgia joined the Fund on May 5, 1992 and has Article VIII Status.

II. General Resources Account:

SDR MillionPercent of Quota
Quota150.30100.00
Fund holdings of currency150.30100.00
Reserve position in Fund0.010.01

III. SDR Department:

SDR MillionPercent of Allocation
Holdings0.60N/A

IV. Outstanding Purchases and Loans:

SDR MillionPercent of Quota
PRGF Arrangements157.11104.53

V. Latest Financial Arrangements:

TypeApproval

Date
Expiration

Date
Amount Approved

(SDR million)
Amount Drawn

SDR Million)
PRGF6/4/046/3/0798.0070.00
PRGF1/12/011/11/04108.0049.50
PRGF2/28/968/13/99172.05172.05

VI. Projected Payments to Fund: (SDR million; based on existing use of resources and present holdings of SDRs):

Forthcoming
20072008200920102011
Principal25.9422.1117.9614.1017.90
Charges/interest0.710.590.490.420.33
Total26.6422.7018.4514.5218.23

VII. Implementation of HIPC Initiative:

Not applicable.

VIII. Safeguards Assessments:

Under the Fund’s safeguards assessment policy, the National Bank of Georgia (NBG) is subject to an assessment with respect to the PRGF arrangement approved on June 4, 2004. The assessment was completed on December 10, 2004 and concluded that safeguards in place at the NBG appear generally adequate. However, certain vulnerabilities were identified in the internal audit and internal controls areas, and the safeguards assessment recommended measures to address them.

IX. Exchange Arrangements:

(a) Since April 29, 1993, the Tbilisi Interbank Currency Exchange (TICEX), established by the NBG and a group of commercial banks, has conducted periodic auctions to determine the exchange rate of the domestic currency vis-à-vis the U.S. dollar. These auctions are conducted daily. Foreign exchange bureaus are allowed to buy and sell foreign currency bank notes. Georgia’s exchange rate regime is classified as “managed floating.”

(b) Georgia maintains no exchange restrictions on the making of payments and transfers for current international transactions except for exchange restrictions maintained for security reasons, and notified to the Fund pursuant to Executive Board Decision No. 144-(52/51).

X. Article IV Consultation:

The 2006 Article IV consultation was concluded on March 31, 2006.

XI. FSAP Participation:

Two FSAP missions visited Tbilisi during May 1–15, and July 24–August 7, 2001. An FSAP update mission visited Tbilisi during February 15–28, 2006.

XII. Technical Assistance:

See Table 1 of this Appendix.

Table 1.Georgia: Fund Technical Assistance Missions, 2001–05
SubjectType of MissionTimingCounterpart
Fiscal Affairs Department (FAD)
Public Expenditure ManagementAssessment of Treasury system and preparing work plan for the resident advisorJun. 12–19, 2001Ministry of Finance
Public Expenditure ManagementReview of the draft Budget System LawMar. 14–Apr. 02, 2002Ministry of Finance
Public Expenditure Management and Fiscal ROSCAssessment of Treasury system and of observance of standards and codesJan. 16–30, 2003Ministry of Finance
Public Expenditure ManagementAssessment of Treasury System and implementation of Budget Systems LawSep. 29–Oct. 11, 2003Ministry of Finance
Tax and Customs AdministrationAssistance in taxation of excisable goodsOct. 27–Nov. 13, 2003Ministry of Finance
Tax PolicyReview of Tax PolicyJune 8–21, 2004Ministry of Finance
Public Expenditure ManagementAssessment of Treasury system.Nov. 8–23, 2004Ministry of Finance
Revenue AdministrationModernizing Tax AdministrationNovember 2005Ministry of Finance
Tax AdministrationInstallationJuly 9–14, 2006Ministry of Finance
Tax AdministrationFollow-up assistanceOct. 9–25, 2006Ministry of Finance
Tax Administration ReformProvide strategic and technical advice on tax administration reform programJan. 17–30, 2007Ministry of Finance
Monetary and Capital Markets Department (MCM)
Banking, foreign exchange reserve management, monetary programming, and researchAdvisoryFeb. 26–Mar. 8, 2001National Bank of Georgia
Payment Systems, Bank Supervision and Resolution, Internal Audit, Foreign reserve Management, and ResearchAdvisoryOct. 23–Nov. 6, 2001National Bank of Georgia
Payment Systems and Bank ResolutionAdvisoryMar. 11–19, 2002National Bank of Georgia
Accounting and Audit, Anti-Money Laundering, Bank Supervision, and Monetary OperationsAdvisorySep. 24–Oct 9, 2002National Bank of Georgia
Payment SystemsAdvisoryJune 16–20, 2003National Bank of Georgia
Government Securities Market, Deposit Insurance, Anti-Money LaunderingAdvisoryApril 20–30, 2004National Bank of Georgia
Monetary Operations, Banking Sector CompetitionAdvisoryOct. 24–Nov. 5, 2004National Bank of Georgia
Liquidity management; trends in securities and insurance sectorsAdvisoryApril 18–29, 2005National Bank of Georgia
Statistics Department (STA)
National AccountsFollow-up assistanceMar. 26–Apr. 6, 2001State Department of Statistics
Balance of Payments StatisticsFollow-up assistanceFebruary 13–27, 2002State Department of Statistics
Money and BankingFollow-up assistanceMarch 2–15, 2002National Bank of Georgia
Data ROSCAssessment of observance of standards and codesJuly 15–31, 2002State Department of Statistics, National Bank of Georgia, Ministry of Finance
Balance of Payments StatisticsFollow-up assistanceMay 20–June 3, 2003State Department of Statistics
Government Finance StatisticsFollow-up assistanceNov. 5-18, 2003State Department of Statistics, Ministry of Finance
National AccountsFollow-up assistanceApril 26–May 7, 2004State Department of Statistics
National AccountsFollow-up assistanceApril 18–29, 2005State Department of Statistics
Price StatisticsFollow-up assistanceMay 23–June 3, 2005State Department of Statistics
Balance of Payments Statistics/International Investment PositionFollow-up assistanceJune 15–28, 2005State Department of Statistics and National Bank of Georgia
Price StatisticsFollow-up assistanceJune 20–July 13, 2006State Department of Statistics
Balance of PaymentsFollow-up assistanceSept. 6–19, 2006National Bank of Georgia
GDDS/Government Finance StatisticsFollow-up assistanceNov. 8–22, 2006State Department of Statistics, National Bank of Georgia, Ministry of Finance
Legal Department (LEG)
Tax CodeFollow-up assistanceJan. 28–Feb. 9, 2001Ministry of Finance, Tax Inspectorate of Georgia
Tax CodeFollow-up assistanceJul. 13–24, 2001Ministry of Finance, Tax Inspectorate of Georgia

XIII. Resident Representative:

The fifth resident representative, Mr. Christiansen, took up his post on August 1, 2004.

XIV. National Bank of Georgia Resident Advisors:

Ms. Vance, MAE peripatetic banking supervision advisor to the NBG, commenced a series of visits to Tbilisi in September 1997. Mr. Nielsen, an MAE advisor, provided technical assistance to the NBG in May 1998. Mr. Viksnins was an MAE peripatetic advisor to the NBG president starting in October 1999. Mr. Fish was resident advisor on banking supervision from August 10, 1999 to January 31, 2002. Mr. Bernard Thompson provided peripatetic technical assistance in accounting and internal audit in March and August 2000. Mr. Wellwood Mason provided technical assistance on payment system issues on a peripatetic basis in 2002 and 2003. Mr. Howard C. Edmonds serves since September 2004 as a resident advisor on banking supervision issues.

XV. Ministry of Finance Resident Advisors:

Mr. Sharma was an FAD resident advisor and assisted the authorities in the development of a Treasury beginning in May 1997. Mr. Sainsbury, an FAD advisor, assisted the Ministry of Finance from June 1998 to November 1999. Mr. Chaturvedi was FAD resident advisor in 2001 and 2002 to assist the authorities in continuing the development of the Treasury and the Treasury Single Account, in revising the legislative framework, expenditure control systems, and budgeting issues. Between 2001 and 2003, Mr. Welling was an FAD peripatetic advisor to assist the State Customs Department in preparing and introducing measures for the custom reform and modernization program. In March 2005, Mr. Zohrab started advising the authorities on treasury-related reforms, and his term ended in November 2006.

Annex II. Georgia: IMF-World Bank Relations

Partnership in Georgia’s Development Strategy

1. The Government has prepared a second PRSP Progress Report—or the Economic Development and Poverty Reduction Program (EDPRP) Progress Report as it is known in Georgia. A Joint Staff Advisory Note was prepared which together with the Progress Report on the EDPRP were presented to the Boards of IDA and IMF in September 2006. The IMF presented the Staff Report of the Fourth Review under the PRGF arrangement to the IMF Board in September 2006. The latest World Bank Country Partnership Strategy (CSP) of Georgia for FY06-09 was presented to the World Bank Board of Executive Directors in September 2005. The Second Poverty Reduction Support Operation (PRSO II), the second in a series of PRSOs was discussed and approved by the Board in September 2006, and a proposed third PRSO is currently under preparation.

2. The Fund has taken the lead in assisting Georgia in improving macroeconomic stability and pursuing fiscal reforms. The World Bank has taken the lead in the policy dialogue on structural issues, focusing on: (i) strengthening public expenditure management; (ii) improving performance of the public sector; (iii) reducing corruption; (iv) deepening and diversifying sources of growth; (v) protecting the environment; and (vi) reducing poverty. Georgia is one of the largest IDA borrowers in the CIS, with borrowing of US$861.6 million for 37 operations. The PRSO program has supported further elaboration and implementation of the key elements of the Government’s poverty reduction strategy as described in the PRSP Progress Report (or EDPRP Progress Report).

3. The PRSO program focuses on four central reform areas: (i) strengthening public sector accountability, efficiency, and transparency; (ii) improving electricity and gas sector services; (iii) improving the environment for private sector development; and (iv) improving social protection, education and health care services.

4. Other support has come in the form of project support and Analytic and Advisory Activities across a broad spectrum of areas including education, health care, social protection, energy, roads, water and sanitation, agriculture, agricultural research and extension, irrigation and drainage, forestry, environment, biodiversity, enterprise development, municipal development, judicial reform, and cultural heritage. A Public Expenditure Review (PER) was prepared in 2002, and a Trade Study in 2003. A Country Procurement Assessment Report (CPAR) was prepared in 2002 and a Country Financial Accountability Assessment (CFAA) in 2003. A Country Fiduciary Assessment (CFA) is scheduled for FY07. A series of annual programmatic Poverty Assessments are being implemented with a report to be issued in 2007. A Programmatic Public Finance Policy Review (PPFPR) and a Country Economic Memorandum (CEM) are planned for FY08.

5. Georgia became a shareholder and a member of IFC in 1995. As of January 1, 2007, IFC has invested around $180 million to finance projects in the financial, infrastructure, oil and gas, and manufacturing sectors. In the financial sector, IFC has focused on supporting the development of the housing finance market, providing investment and technical assistance to two leading banks – the Bank of Georgia and TBC Bank. To reach small and medium enterprises, IFC helped to establish ProCredit Bank of Georgia, the country’s first bank specializing in lending to micro and small enterprises. IFC has also provided a credit line to TBC Leasing to support the rapid growth of their portfolio of SME clients; this project grows out of two year’s of technical assistance to the Government and private sector to support the growth of the leasing sector. IFC continues to look for opportunities to support these clients, as well as other emerging financial market leaders to deepen the financial sector and increase the range of financial products available.

6. In the real sector, IFC’s most recent transaction is a loan to TAV to support their construction of new airport terminals in Tbilisi and Batumi. In oil transit, IFC has provided equity and credit to local and international companies, including investments by British Petroleum and other sponsors in the construction of the Baku- Supsa Early Oil Pipeline and the Baku-Tbilisi-Ceyhan Pipeline. Other investment projects have been in electricity distribution (AES-Telasi), mineral water (GGMW), and glass bottle production (Ksani Glass Factory). In the real sector, IFC continues to look for opportunities to support the growth of the private sector, particularly in export-oriented companies or those that support overall private sector development. Sectors of interest include agribusiness, infrastructure, manufacturing, and the development of natural resources.

7. IFC has also provided donor-supported technical assistance to strengthen its client banks and introduce new financial products (including leasing and housing finance). IFC is currently providing technical assistance in Georgia to improve the business climate and corporate governance practices. The World Bank-IFC Doing Business report has ranked Georgia as the top reformer in its Doing Business 2007 report, and the Government is actively engaged with IFC to make further progress on reforms for the business enabling environment.

8. The division of responsibilities between the two institutions is described in the next section. In a number of areas—for example, the social sectors, rural development, environment, and infrastructure—the World Bank takes the lead in the dialogue and there is no related conditionality in the IMF-supported program. The World Bank is also leading the dialogue on private sector development and energy, and the World Bank analysis serves as inputs into the Fund program. In other areas—the financial sector, public expenditure management, and civil service reform—both institutions are working together. Finally, in areas like monetary policy and domestic customs revenue, the IMF takes the lead.

IMF-World Bank Collaboration in Specific Areas

Areas in which the World Bank leads and there is no direct IMF involvement

9. In the social sectors, IDA updates Georgia’s Poverty Assessment based on quarterly household survey data. IDA’s focus has been to improve execution of budgetary expenditures for health, education and poverty benefits and to raise the efficiency in the use of scarce public resources. Through the Social Investment Fund credits, IDA is focusing in particular on areas with high poverty levels to provide basic infrastructure to the poorest communities. Through the PRSO program, IDA is strengthening the dialogue with the Government on social protection reform (safety nets, pensions, poverty benefits, labor market institutions and policies). Under the PRSO program, a poverty benefit targeted for the extreme poor is being implemented.

10. In education, the Adaptable Program Credit addresses a broad spectrum of educational reform issues, aimed at improving learning outcomes of primary and secondary students through curriculum reform, development of a national assessment and examination system, training of teachers, provision of learning materials, and development of capacity to make better use of physical, financial, and human resources. It also tackles key financing issues through the introduction of a per capita based formula for financing basic education. While the investment needs of school buildings are substantially higher than is currently affordable, the Social Investment Fund projects continue to assist in financing urgent repairs to school facilities in many communities. The PRSO program is supporting the Government’s efforts in institutionalizing systemic changes initiated with its education reform strategy.

11. In health, IDA credits support the government in improving health care financing, exploring risk-pooling options, introducing a new system of primary health care, and improving the focus of publicly-funded services to the poor and on priority public health interventions. IDA is engaged in policy work in health sector reform in the context of the PRSO program through a health care reform sub-component as well as through the public expenditure policy reform sub-component.

12. In infrastructure, support is being provided through the Secondary and Local Roads Project, the Municipal Development and Decentralization Project II and the Social Investment Fund Project. These projects provide financing at the community level for critical infrastructure needs, primarily for school and health facility heating and repair, small hydropower schemes to provide electricity, drinking water and sanitation rehabilitation, as well as transportation infrastructure rehabilitation. IFC supported the privatization of Tbilisi electricity distribution through an investment in AES-Telasi, and IFC Advisory Services advised the Government on the management contract for UEDC. The recently approved Infrastructure Pre-Investment Facility project is to facilitate infrastructure investments of strategic importance and/or special complexity by providing technical assistance to assess the feasibility and effectiveness of investments, focusing on energy and transport sectors.

13. In rural development, IDA credits have supported development of private sector farming and agro-processing improvements, agricultural credit, irrigation and drainage, and agricultural research. IDA credits have also been supporting creation of local institutions, such as rural credit unions and water users associations. A recently approved Rural Development Project is to develop the productivity and profitability of the private agriculture sector with the aim to increase incomes and employment and reduce poverty in rural areas.

14. A recently closed Judicial Reform Project provided funds for development of new court administration and case management procedures, rehabilitation and construction of courthouses, a computerized network system, assistance for judicial training, and an extensive public information and education outreach effort to inform citizens of their rights and communicate the Government’s reform efforts.

Areas in which the World Bank leads and its analysis serves as input into the IMF program

15. The World Bank leads the dialogue on structural reforms through the PRSO program. Institution building and technical assistance have been supported through the Structural Reform Support Project. The World Bank also leads in the areas of:

a) Private Sector Development. The PRSO program focuses on improving investment climate and reducing constraints to private sector development in Georgia. IDA has also been supporting private sector participation in other areas, such as energy, urban services and agriculture. The IMF has worked with the authorities to initiate audits of the accounts of three major state-owned enterprises.

b) Energy. The energy system was in poor condition, with unreliable supply and unsustainable debts. However, under the PRSO program, the Georgian authorities have made progress and payment collections and service levels have improved substantially in the power sector. The Government of Georgia has been working with IDA and other donors, including the Fund, to implement a series of short-term action plans and longer term steps to improve the overall functioning of the sector. IDA has also provided additional funding to the power sector in 2004. At the beginning of the PRGF program, the Fund has been focusing on reducing quasi-fiscal losses in the sector. The World Bank through the PRSO program focused on improved bill collections, and supported the pursuit of tariff policies at cost-recovery levels was facilitated by a World Bank-assisted review of the tariff policy methodology. The Georgian authorities prepared the Energy Sector Strategic Action Plan for 2005–08 which is being implemented and updated periodically under the PRSO program. In a new operation, the World Bank will finance a feasibility study for a major, new hydropower plant that could add about 20 percent to the country’s hydropower capacity.

c) Public Sector Management. The PRSO program supports through its first pillar, inter alia, improving public expenditure policies and management; implementing procurement reform; strengthening public financial management accountability; implementing intergovernmental fiscal reform; developing a strategy for administrative and civil service reform; and implementing the National Anti-corruption Strategy. The Public Sector Financial Management Reform Support Project (IDA grant pooled together with resources from other donors) is to provide technical assistance and capacity building in support of the first pillar of the PRSO program. The Fund is providing technical assistance in support of tax and customs administration reform.

d) Municipal Finance: The Municipal Development and Decentralization Project II has been assisting the Government to review the current intergovernmental fiscal relation, and to suggest an equalization transfer system to compensate for horizontal fiscal disparities across local governments.

Areas of shared responsibility

16. The World Bank and the Fund have been working jointly in the following main areas:

a) Poverty Reduction Strategy. Both institutions have been working closely with the Government to support the implementation of the PRSP (or EDPRP as it is known in Georgia), through seminars and workshops, direct staff input, and donor coordination. A JSAN on the progress with implementation of the Government’s EDPRP was issued in September 2006.

b) Budget Planning and Execution. The PRSO program is supporting reforms to improve public expenditure policies and management including development of an MTEF, and strengthening public financial accountability. The Public Sector Financial Management Reform Support Project is financing technical assistance and necessary investment to support budget planning and management processes within the MoF and line ministries. The Fund is focusing on treasury reform within the Ministry of Finance.

c) Financial Sector Reforms. The joint Financial Sector Assessment Program has supported: (i) strengthened banking and non-banking supervision; (ii) introduction of international accounting standards; (iii) consolidation of banks through higher capital requirement ratios; (iv) anti money-laundering legislation; (v) strengthening the regulatory environment and removing impediments for development of viable non- bank financial institutions; and (vi) strengthening the payment system. IFC has worked to strengthen the banking sector through investment and technical assistance, and has supported the development of the financial leasing market through technical assistance. The Fund has focused on banking supervision, anti-money laundering legislation, and improvements in monetary control instruments with extensive technical assistance from its Monetary and Financial Systems Department.

Areas in which the IMF leads and its analysis serves as input into the World Bank program

a) Fiscal Framework and reforms in tax policy and tax and customs administration. The Fund’s focus on prudent fiscal policy has served as an important framework for IDA’s work on public expenditure management. The Fund’s Fiscal Affairs Department has the lead in the areas of tax policy and tax and customs administration reform.

b) Economic Statistics. IMF technical assistance has been conducive to improvements in national accounts, price, monetary and government financial statistics. The World Bank’s grant on Statistical Capacity Building will build on the recommendations of Fund TA to strengthen the quality of national accounts statistics.

12

Areas in which the IMF leads and there is no direct World Bank involvement

a) Monetary Framework. The IMF collaborates closely with the NBG in the design and implementation of a monetary program that aims at rebuilding international reserves while keeping inflation low and monetizing the economy.

World Bank Group Strategy

On September 15, 2005, the World Bank Executive Board endorsed the new Country Partnership Strategy (CPS) for FY06-09 designed to assist Georgia with deeper institutional reform as well as more fundamental infrastructure improvements. The CPS builds on the EDPRP, as well as emerging Government strategic thinking on the development framework. In doing so, it targets several goals: (i) Generating growth and job creation by removing barriers to private sector development and improving infrastructure, finance and markets; (ii) Enhancing human development and social protection through improved education, health, social protection, and community services; and (iii) Strengthening public sector management and budgetary processes to enable Georgia to better plan and meet its own development goals. Along with the CPS, the First PRSO, of a series of single tranche annual Poverty Reduction Support Operations was approved of which US$13.5 million is a regular IDA credit and US$6.5 million is an IDA grant. The Second PRSO for US$ 20 million of IDA credit was approved by the World Bank’s Board in October 2006. Other recent operations include a US$5 million Infrastructure Pre-Investment Facility Project, a US$3 million grant Public Sector Financial Management Reform Support Project, a US$24 million Reform Support Credit, a US$20 million Secondary and Local Roads Project, a US$3.6 million Electricity Market Support Project, a US$10 million Rural Development Project, and a US$5 million Irrigation and Drainage Community Development Project Additional Funding for flood control. The World Bank continues its discussion with the Government on a more comprehensive medium-term reform strategy that would be supported by future Poverty Reduction Support Operations and technical assistance operations.

Questions may be referred to Ms. R. Quintanilla (202-473-7673), Ms. Afsaneh Sedghi (202-4737518), or Mr. A. Cholst (202-458-0324).

Annex III. Georgia: Relations with the EBRD

(As of December 31, 2006)

1. As of December 31, 2006, the European Bank for Reconstruction and Development (EBRD) had signed 72 investments in Georgia with cumulative commitments totaling US$525.14 million.1 Current Portfolio Stock equals to US$349.1 million. The EBRD’s first operation, a power rehabilitation project, was signed in December 1994. Since then, the pace and composition of portfolio growth has varied significantly from year to year.

2. During 2006, the Bank signed 26 transactions in Georgia for US$150.25 million. The project examples include: additional US$10 million loan to Georgia State Electro System for Enguri HPP Phase II rehabilitation program; US$ 21.2 million loan to TAV Georgia, the concession of the Tbilisi International Airport for construction of new passenger terminals in Tbilisi and Batumi; mortgage loan of US$8 million to Bank Republic and US$3 million credit line for on-lending purposes to SMEs; Loan to the cities of Kutaisi and Poti of €3 million and €2.5 million respectively to improve the water supply in the cities.

3. The ratio of private sector projects in the portfolio now stands at 84.4 percent. The Bank plans to focus primarily on private sector financing, but may also consider selected public sector projects. The Bank will give preference to non-sovereign operations although, where sovereign guarantees will be required, donor co-funding on a grant basis will be sought.

4. The EBRD is helping Georgia to benefit from its privileged location, transforming it into a regional transportation and natural resources hub. Georgia is part of the ‘Early Transition Countries’ (ETC) initiative. Launched in April 2004, the initiative aims to increase investments in the Bank’s seven poorest countries. The initiative builds on international efforts to address poverty in these countries. Through this initiative, the EBRD focuses its efforts on private sector business development and selected public sector interventions. It aims to stimulate market activity by using a streamlined approach to financing, focusing on smaller projects, mobilizing more investment, and encouraging ongoing economic reform. The Bank will accept higher risk in the projects it finances in the ETCs, while still respecting the principles of sound banking. Since launch of the ETC initiative the Bank’s annual business volume in Georgia has been increased five times.

Table 1.Georgia: EBRD Portfolio for GeorgiaAs of December 31, 2006 (US$, million)
Project NameDate of

Agreement
Outstanding

Amount
Bank Republic - MSE Loan27/04/063.0
Bank Republic Equity15/09/068.2
Bank Republic Mortgage Loan20/12/064.0
Bank of Georgia - SME Loan23/07/030.8
DIF - Delidor17/06/051.6
DIF - Georgian Hazelnut Production Ltd.26/10/060.8
DIF - Iberia Refreshments25/09/032.7
DIF - Imedi L30/12/061.5
DIF - Lomisi20/12/053.3
DIF - Mantashev Trade Rows JSC22/12/060.8
DIF - Teliani Valley20/05/041.3
DLF - BTM TEKSTIL21/12/062.3
DLF - Georgian Hazelnut Production Ltd26/10/063.3
DLF - Lomisi08/12/062.0
ETC Non-Bank MFI Framework II - Constanta28/11/063.0
Georgia: Trans-Caucasian Rail Link Project22/12/988.9
Georgian State Electrosystem22/12/9833.6
Georgian Wines & Spirits Ltd.10/03/057.3
Intellectbank (Sub Project of Georgia SME)11/11/970.3
JSC Channel Energy Poti Port19/03/029.2
Kutaisi Water Project15/09/064.0
MCFF - Bank of Georgia Full Recourse Portion14/06/055.0
MCFF - BoG Iberia Refreshments Sub-Loan (NRP)27/09/063.2
MCFF - TBC Bank - Nola Ltd Sub-Loan (NRP)22/12/050.7
MCFF - TBC Bank JSC Full Recourse Portion13/06/055.0
MCFF - TBC Bank Lomisi Ltd Sub-Loan (NRP)03/08/053.1
MCFF BOG - Renewable Energy Programme - Okami21/12/060.1
SHPP NRP
MCFF BOG - Renewable Energy Programme Lopota21/12/060.2
SHPP NRP
Poti Water Supply Project15/09/063.3
Power Rehabilitation Project20/12/944.6
ProCredit Bank Georgia11/10/013.0
Regional TFP: Bank Republic (Guarantee & Pre-export)15/02/062.3
Regional TFP: Bank of Georgia (Guarantee & Pre-export)29/07/9910.7
Regional TFP: Cartu Bank28/04/060.1
Regional TFP: TBC Bank (guarantee & pre-export)17/08/999.1
Regional TFP: United Georgian Bank (UGB)24/12/009.5
TBC Bank - SME Credit Line19/12/034.5
TBC Bank - Syndicated Loan20/12/057.0
TBC Bank Mortgage Loan29/06/0615.0
TBC Bank SME Credit Line III26/09/055.0
TBC Leasing - Equity Investment01/03/060.1
TBC Leasing, Senior Debt21/12/053.0
TbilComBank (Sub Project of Georgia SME)12/12/960.3
Tbilisi International Airport17/05/0627.0
Tbilisi Public Transport Project29/07/053.7
United Georgian Bank (debt, equity)20/11/972.4
United Georgian Bank Capital Increase09/10/062.3
United Georgian Bank Credit Line 200409/10/0610.0
Direct Investments / Sub Total242.0
Regional Projects
BIH18/12/066.0
BSR Europe Co-Investment Facility14/08/069.2
Baku-Tbilisi-Ceyhan (BTC) Pipeline03/02/0462.2
Baring Vostok Private Equity Fund13/12/000.2
First NIS Regional Fund21/11/940.0
Lukoil Overseas: South Caucasus Gas Pipeline28/07/0529.4
107.1
TOTAL349.1
Annex IV. Georgia: Statistical Issues

1. The Fund has provided substantial technical assistance in the compilation of macroeconomic statistics (Appendix I, Table 1). Despite improvements in the areas of national accounts, price, monetary, and government finance statistics, the quality of macroeconomic statistics remains poor, reflecting deficiencies in statistical methodologies, coverage, and insufficient resources. Problems are particularly acute in the compilation of national accounts, balance of payments, foreign trade, and fiscal statistics. The transfer of responsibility for the balance of payments from the State Department of Statistics (SDS) to the National Bank of Georgia (NBG) in January 2007 is expected to lead to improvements in external sector statistics.

2. Nonetheless, the core statistical indicators compiled by the authorities are provided on a timely basis and are generally adequate for surveillance and program monitoring. The data module of the Report on the Observance of Standards and Codes (ROSC), prepared in July 2002 was published on the Fund’s external website on May 27, 2003. In August 2005, the authorities notified the Fund of their commitment to participate in the IMF’s General Data Dissemination System (GDDS), and appointed a national GDDS coordinator. A GDDS/SDDS mission from the Statistics Department visited Tbilisi during November 8–22, 2006 and finalized the metadata for participation in the GDDS. The mission also made recommendations about the steps to be taken by the authorities to subscribe to the Special Data Dissemination Standard (SDDS). The implementation of these recommendations was included in the plans for improvement under the GDDS for 2007. On December 15, 2006 Georgia began participation in the GDDS.

Real sector

3. National accounts statistics follow the concepts and definitions of the System of National Accounts 1993, with GDP estimates by production and expenditure compiled annually and quarterly. Revisions of the national accounts follow an established schedule. Preliminary national accounts estimates are available after 85 days, and final estimates after 13 months. The 2002 data ROSC mission found several weakness regarding data sources; inadequate coverage of the business register; poor coverage of units in terms of value added for agriculture, retail trade, construction, catering, and services; limited administrative sources to estimate the non-observed economy; and inadequate data for imports and exports of services (taken from the balance of payments). Follow-up missions in early 2004 and April 2005 found that although the authorities have made good progress in addressing some of these issues, there was scope for improving the constant price estimates and advancing in the development of the system of supply and use tables. Regarding price statistics, a May/June 2006 mission reported important progress regarding the development of agricultural indices and plans to upgrade both CPI and PPI methodology, PPI specification, and dissemination practices.

Money and banking

4. A March 2002 STA mission found that the authorities had implemented many of the recommendations made by the December 2000 mission. The July 2002 data ROSC found that most elements in the data quality assessment framework for monetary statistics were fully or largely observed, and recommended improvements in the statistical coverage of non-bank depository corporations and the provision of documentation on metadata. It also recommended increased transparency regarding access by governmental agencies to monetary statistics prior to their release to the public.

5. In response to a request from STA, the NBG has begun compiling monetary data using the framework of the new Standardized Report Forms (SRF) and has been providing regular updates of these data to STA. These data were published in the December 2006 issue of the IFS Supplement. Also, beginning from December 2001, data published in IFS have been revised in accordance with the SRF.

Government finance

6. Government finance statistics (GFS) on a cash basis are reported to STA for publication in the GFS Yearbook. Classification broadly follows the analytic framework of the 1986 Government Finance Statistics Manual, but the concepts and definitions of revenue, expenditure, and financing differ from the international standard in significant respects. In addition, the central treasury and line departments employ differing accounting systems, with the treasury having a single-entry cash basis, which hampers the treasury’s capacity to reconcile bank statements and hinders the reporting of information on accounts payable. Another issue concerns the limited budget classifications available for expenditure. Discrepancies can arise when matching budget appropriations with the classified expenditure, because the locally developed structure of expenditure codes changes frequently. Consequently, statistical performance and reliable budget reporting could improve once the treasury adopts internationally accepted accounting standards, including a unified treasury general ledger maintained on a double-entry cash basis. There are substantial differences in the classification systems of different government subsectors. Bridge tables linking national classification codes and the Government Finance Statistics Manual 2001 (GFSM 2001) codes were established by a GFS mission in 2003 and used for reporting. The authorities plan to compile and disseminate government finance statistics on a GFSM 2001 basis starting in 2007.

Balance of payments

7. A technical assistance mission in September 2006 assisted the authorities to prepare an action plan for the transfer of responsibility for the compilation of the balance of payments from the SDS to NBG; advised on the structure of new balance of payments division; and developed a framework for the collection of source data. Also, the mission further developed the framework for compilation of an international investment position statement; and assisted in the preparation of metadata in connection with Georgia’s participation in the GDDS.

8. Following the transfer of the balance of payments compilation function to the NBG in mid-January 2007, a new law on official statistics is expected to be presented to Parliament for approval in mid 2007. It identifies the NBG as one of the producers of official statistics and defines its responsibility as compiler of the balance of payments statistics. The NBG will also be empowered to collect source data from economic agents in all sectors. The SDS will remain the main provider of data for goods, services, and direct investment. A Statistics Advisor stationed in Baku will, through a series of peripatetic visits, assist the Georgian authorities to develop the balance of payments information base, including the development of an international transactions reporting system.

Georgia: Table of Common Indicators Required for Surveillance

(as of January 26, 2007)

Date of latest observationDate receivedFrequency of Data6Frequency of Reporting 6Frequency of publication6Memo Items:
Data Quality – Methodological soundness7Data Quality – Accuracy and reliability8
Exchange Rates8/21/068/22/06DWM
International Reserve Assets and Reserve Liabilities of the Monetary Authorities18/21/068/22/06DWM
Reserve/Base Money12/061/8/07MMMO, LO, LO, OO,O,O,O,LO
Broad Money12/061/17/07MMM
Central Bank Balance Sheet12/061/8/07MMM
Consolidated Balance Sheet of the Banking System12/061/17/07MMM
Interest Rates212/061/8/07WWM
Consumer Price Index7/068/7/06MMMO,LO,O,OLO,LO,O,O,O
Revenue, Expenditure, Balance and Composition of Financing3 – General Government47/068/23/06MMMLNO,LO,LNO,OLO,O,LO,O,O
Stocks of Central Government and Central Government-Guaranteed Debt58/059/14/05MMM

Domestic not disseminated
External Current Account BalanceQ1/066/30/06QQQO,LO,LO,LOLNO,LNO,LNO,LNO,LNO
Exports and Imports of Goods and Services6/0608/15/06MMM
GDP/GNPQ1/066/27/06QQQO,LO,O,LOLNO,LNO,LNO,LO,LO
Gross External Debt08/0509/06/05MMM

Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A), Irregular (I); Not Available (NA).

Reflects the assessment provided in the data ROSC (published on May 27. 2003, and based on the findings of the mission that took place during July 15–31, 2002) for the dataset corresponding to the variable in each row. The assessment indicates whether international standards concerning concepts and definitions, scope, classification/sectorization, and basis for recording are fully observed (O), largely observed (LO), largely not observed (LNO), or not observed (NO).

Same as footnote 7, except referring to international standards concerning source data, statistical techniques, assessment and validation of source data, assessment and validation of intermediate data and statistical outputs, and revision studies.

Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A), Irregular (I); Not Available (NA).

Reflects the assessment provided in the data ROSC (published on May 27. 2003, and based on the findings of the mission that took place during July 15–31, 2002) for the dataset corresponding to the variable in each row. The assessment indicates whether international standards concerning concepts and definitions, scope, classification/sectorization, and basis for recording are fully observed (O), largely observed (LO), largely not observed (LNO), or not observed (NO).

Same as footnote 7, except referring to international standards concerning source data, statistical techniques, assessment and validation of source data, assessment and validation of intermediate data and statistical outputs, and revision studies.

1Evaluated at an exchange rate of US$1.3168 per euro.

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