IMF helps Georgia avoid economic slowdown

/By AzerNews/

By Mushvig Mehdiyev

The International Monetary Fund has come up with a list of recommendations to help stabilize Georgia's economy.

Improving the country’s social policy, increasing taxes and strengthening the dialogue and cooperation between the government and the National Bank are among the recommendations the analytic mission of IMF introduced to the Georgian rulers.

The IMF mission led by Mark Griffiths has set the assessment of the influence of the situation in neighboring countries on Georgia’s economy during its visit to Tbilisi from February 23 to March 4.

Despite IMF’s suggestion to increase taxes, Georgia’s Economy Minister Giorgi Kvirikashvili announced taxes would be reduced instead.

"We have been working very hard to reduce taxes. We think even more liberalization is needed to achieve a result," Kvirikashvili said.

While evaluating the reasons behind the devaluation of Georgia’s national currency, the lari, Griffiths said a combination of several strong shocking factors had influenced Georgia’s economy, including the Russia-Ukraine crisis, deep recession in Russia and the devaluation of currencies in trade partner countries.

"Following the shocks, Georgia’s exports dropped by 30 percent compared to the previous year and the monetary transfers sent home by those working abroad reduced by 25 percent,” Griffiths noted.

"It is true that the lari has depreciated less than other currencies in the region, but anyway it creates problems for individuals who have loans in U.S. dollar against their incomes in the lari,” he added.

Georgia’s economic growth may reach two percent this year but risks are not excluded, Griffiths believed.

"The activities of Georgia’s main trade partners have also slowed and devaluation of their currencies unavoidably influences Georgia’s competitiveness," Griffiths said. In view of recent allegations about the National Bank's inappropriate measures amid the currency crisis, the IMF Mission leader said it was necessary to respect the bank’s independence.

"The government and the bank should unite and resolve the existing problems," Griffiths noted.

Griffiths went on to add that no intervention was needed by the bank when there was a floating exchange rate in a country.

Giorgi Kadagidze, the National Bank's chairman, said earlier that the bank did everything right in order to avoid the currency crisis, and it would not spend money from the reserves to strengthen the lari as its devaluation came after fundamental economic problems in Georgia.

Following a meeting with IMF reps a week ago, Kvirikashvili said the leading monetary institution voiced its backing to the national currency destabilization efforts taken in Georgia.

Georgia's national currency, the lari, started to fall in value against the dollar last November. A drop in oil prices and Russia' economic comedown following west-imposed sanction have contributed to such a devaluation.

As of March 6, one lari is traded at 2.12415 per one dollar, while one euro is calculated at 2.34748 lari.