The staff of the International Monetary Fund (IMF) has reached an agreement with the Georgian authorities on their request for a 24-month Stand-By Arrangement (SBA) and Standby Credit Facility (SCF) in support of the government’s economic and financial program for 2012–13. The staff-level agreement will be submitted to the IMF Executive Board for its consideration on April 11. Under the arrangement, which the authorities intend to treat as precautionary, Georgia would be able to access IMF credit of up to SDR 250 million (about US$387 million), evenly divided between the SBA and the concessional SCF. The proposed arrangement follows the successful completion of the 33-month SBA that expired on June 14, 2011 (see Press Release No.11/224). SDR 577.1 million (about US$893 million at current exchange rates) were disbursed under this arrangement.

Mr. Edward Gardner, Mission Chief for Georgia and Senior Resident Representative, issued the following statement today in Tbilisi:

“The objectives of the Stand-By Arrangement that expired in June 2011 were largely achieved. Policies under the program contributed to stabilizing the economy and restarting economic growth, and then to promoting fiscal adjustment and enabling a return to private market financing. Performance in 2011 was stronger than originally envisaged, with growth reaching 7 percent, inflation converging to the low single digits, government debt falling to 34 percent of GDP, and international reserves increasing to US$2.8 billion.

“Despite these achievements, the unsettled external environment has increased vulnerabilities. At this juncture, the economic outlook for 2012 remains relatively favorable, with growth projected to slow to 6 percent and inflation remaining subdued. However, access to IMF resources would become available under the program in the event of a significant worsening of external economic and financial conditions.

“The program’s objectives are to rebuild fiscal buffers, promote external adjustment, strengthen market confidence, and catalyze continued official financial support. Fiscal adjustment, a flexible exchange rate, and monetary policy dedicated to price stability will be the key macro policy underpinnings of the program. The fiscal deficit is targeted to decline to 3.5 percent of GDP in 2012 and to 3 percent in 2013, consistent with a steady reduction of the government debt ratio.

Medium-term challenges remain, notably in terms of lowering the current account deficit (11.5 percent of GDP in 2010) and reducing unemployment (16.3 percent in 2010). To address these challenges, sound macroeconomic policies and strong business environment policies will be complemented with sector policies to encourage private investment and education and training reforms to improve labor-market skills.”