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This is the final review under the Stand-By Arrangement for Georgia. Recent economic developments have been largely in line with the program expectations. Policy targets for the year 2011 have been strengthened. The authorities are in the process of designing a medium-term policy framework to address these challenges. The authorities reiterated their interest in a successor arrangement, but needed time to design their medium-term policy framework before submitting a formal request. The economy is growing at a solid pace, and international reserves have been restored to pre-crisis levels.

International Monetary Fund --- Internationaal monetair fonds --- International monetary fund --- Georgia --- State of Georgia --- Peach State --- Empire State of the South --- جورجيا --- Jūrjiyā --- Cheorchia --- Estato de Cheorchia --- Jôrg·ie --- Corciya --- Джорджия --- Dzhordzhii︠a︡ --- Штат Джорджыя --- Shtat Dz︠h︡ordz︠h︡yi︠a︡ --- Джорджыя --- Dz︠h︡ordz︠h︡yi︠a︡ --- Georgie --- Jóojah Hahoodzo --- Τζόρτζια --- Tzortzia --- Πολιτεία της Τζόρτζια --- Politeia tēs Tzortzia --- Georgio (State) --- État de Géorgie --- Yn Çhorshey --- Çhorshey --- Xeorxia --- Estado de Xeorxia --- Khièu-tshṳ-â --- Jorji --- 조지아 주 --- Chojia-ju --- 조지아주 --- Chojiaju --- 조지아 --- Chojia --- Keokia --- Jorjiạ --- ג'ורג'יה --- G'org'iyah --- מדינת ג'ורג'יה --- Medinat G'org'iyah --- Jeorji --- Djòdji --- Džordžija --- Џорџија --- Жоржиа --- Zhorzhia --- Жоржиа Муж Улс --- Zhorzhia Muzh Uls --- ジョージア州 --- Jōjia-shū --- Jōjiashū --- ジョージア --- Jōjia --- Delstaten Georgia --- Jorjiya --- Georgia suyu --- Джорджія --- Штат Джорджія --- Shtat Dz︠h︡ordz︠h︡ii︠a︡ --- Giorgiye Shitati --- דזשארדזיע --- דזשארדזשיע --- Ìpínlẹ̀ `Georgia --- Džuordžėjė --- 喬治亞州 --- Qiaozhiya Zhou --- 喬治亞 --- Qiaozhiya --- US-GA --- GA --- Economic conditions. --- Economic policy. --- Banks and Banking --- Exports and Imports --- Foreign Exchange --- Money and Monetary Policy --- Public Finance --- Finance: General --- Industries: Financial Services --- International Lending and Debt Problems --- Debt --- Debt Management --- Sovereign Debt --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- International economics --- Public finance & taxation --- Banking --- Currency --- Foreign exchange --- Monetary economics --- Finance --- External debt --- Public debt --- Monetary base --- Loans --- Financial institutions --- Money --- Debts, External --- Debts, Public --- Banks and banking --- Money supply

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The government of Georgia moved forcefully to counter the economic impact of the August 2008 conflict with Russia and global financial crisis. Monetary and prudential policy easing was, however, unable to prevent a sharp credit squeeze. The economy is recovering at a solid pace, with real GDP growth expected to exceed 6 percent in 2010. To reduce exposure to changes in external market conditions, the authorities could rely more on domestic financing. Macroeconomic policies were generally aligned with previous IMF recommendations.

Economic development --- Economic indicators --- Business indicators --- Indicators, Business --- Indicators, Economic --- Leading indicators --- Economic history --- Quality of life --- Economic forecasting --- Index numbers (Economics) --- Social indicators --- Development, Economic --- Economic growth --- Growth, Economic --- Economic policy --- Economics --- Statics and dynamics (Social sciences) --- Development economics --- Resource curse --- International Monetary Fund --- Internationaal monetair fonds --- International monetary fund --- Georgia --- State of Georgia --- Peach State --- Empire State of the South --- جورجيا --- Jūrjiyā --- Cheorchia --- Estato de Cheorchia --- Jôrg·ie --- Corciya --- Джорджия --- Dzhordzhii︠a︡ --- Штат Джорджыя --- Shtat Dz︠h︡ordz︠h︡yi︠a︡ --- Джорджыя --- Dz︠h︡ordz︠h︡yi︠a︡ --- Georgie --- Jóojah Hahoodzo --- Τζόρτζια --- Tzortzia --- Πολιτεία της Τζόρτζια --- Politeia tēs Tzortzia --- Georgio (State) --- État de Géorgie --- Yn Çhorshey --- Çhorshey --- Xeorxia --- Estado de Xeorxia --- Khièu-tshṳ-â --- Jorji --- 조지아 주 --- Chojia-ju --- 조지아주 --- Chojiaju --- 조지아 --- Chojia --- Keokia --- Jorjiạ --- ג'ורג'יה --- G'org'iyah --- מדינת ג'ורג'יה --- Medinat G'org'iyah --- Jeorji --- Djòdji --- Džordžija --- Џорџија --- Жоржиа --- Zhorzhia --- Жоржиа Муж Улс --- Zhorzhia Muzh Uls --- ジョージア州 --- Jōjia-shū --- Jōjiashū --- ジョージア --- Jōjia --- Delstaten Georgia --- Jorjiya --- Georgia suyu --- Джорджія --- Штат Джорджія --- Shtat Dz︠h︡ordz︠h︡ii︠a︡ --- Giorgiye Shitati --- דזשארדזיע --- דזשארדזשיע --- Ìpínlẹ̀ `Georgia --- Džuordžėjė --- 喬治亞州 --- Qiaozhiya Zhou --- 喬治亞 --- Qiaozhiya --- US-GA --- GA --- Economic policy. --- Banks and Banking --- Exports and Imports --- Foreign Exchange --- Public Finance --- Industries: Financial Services --- Money and Monetary Policy --- International Lending and Debt Problems --- Debt --- Debt Management --- Sovereign Debt --- National Government Expenditures and Related Policies: General --- Financial Institutions and Services: General --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- International economics --- Currency --- Foreign exchange --- Public finance & taxation --- Banking --- Monetary economics --- External debt --- Public debt --- Exchange rates --- Exchange rate flexibility --- Debts, External --- Debts, Public --- Expenditures, Public --- Financial services industry --- Credit

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This paper discusses findings of the Financial System Stability Assessment for Georgia. Georgia has weathered several shocks, but still faces a number of important risks. The economy has withstood well the conflict with Russia, the global financial crisis, and domestic political uncertainty. Significant steps have been taken to strengthen banking regulation and supervision, which exhibit a very high degree of compliance with international standards. The National Bank of Georgia has also introduced an advanced risk-based supervisory regime while maintaining a conservative approach aimed at detecting vulnerabilities at an early stage, and allocating supervisory resources in the most efficient and effective manner.

Banks and banking --- Financial risk management --- Crisis management --- Money laundering --- Finance --- Economic development --- Development, Economic --- Economic growth --- Growth, Economic --- Economic policy --- Economics --- Statics and dynamics (Social sciences) --- Development economics --- Resource curse --- Funding --- Funds --- Currency question --- Laundering of money --- Money washing --- Washing of money --- Commercial crimes --- Crises --- Management of crises --- Management --- Problem solving --- Conflict management --- Risk management --- Agricultural banks --- Banking --- Banking industry --- Commercial banks --- Depository institutions --- Financial institutions --- Money --- State supervision --- Economic aspects --- Prevention. --- Law and legislation --- International Monetary Fund --- Internationaal monetair fonds --- International monetary fund --- Georgia --- State of Georgia --- Peach State --- Empire State of the South --- جورجيا --- Jūrjiyā --- Cheorchia --- Estato de Cheorchia --- Jôrg·ie --- Corciya --- Джорджия --- Dzhordzhii︠a︡ --- Штат Джорджыя --- Shtat Dz︠h︡ordz︠h︡yi︠a︡ --- Джорджыя --- Dz︠h︡ordz︠h︡yi︠a︡ --- Georgie --- Jóojah Hahoodzo --- Τζόρτζια --- Tzortzia --- Πολιτεία της Τζόρτζια --- Politeia tēs Tzortzia --- Georgio (State) --- État de Géorgie --- Yn Çhorshey --- Çhorshey --- Xeorxia --- Estado de Xeorxia --- Khièu-tshṳ-â --- Jorji --- 조지아 주 --- Chojia-ju --- 조지아주 --- Chojiaju --- 조지아 --- Chojia --- Keokia --- Jorjiạ --- ג'ורג'יה --- G'org'iyah --- מדינת ג'ורג'יה --- Medinat G'org'iyah --- Jeorji --- Djòdji --- Džordžija --- Џорџија --- Жоржиа --- Zhorzhia --- Жоржиа Муж Улс --- Zhorzhia Muzh Uls --- ジョージア州 --- Jōjia-shū --- Jōjiashū --- ジョージア --- Jōjia --- Delstaten Georgia --- Jorjiya --- Georgia suyu --- Джорджія --- Штат Джорджія --- Shtat Dz︠h︡ordz︠h︡ii︠a︡ --- Giorgiye Shitati --- דזשארדזיע --- דזשארדזשיע --- Ìpínlẹ̀ `Georgia --- Džuordžėjė --- 喬治亞州 --- Qiaozhiya Zhou --- 喬治亞 --- Qiaozhiya --- US-GA --- GA --- Economic policy. --- Banks and Banking --- Finance: General --- Money and Monetary Policy --- Industries: Financial Services --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- General Financial Markets: General (includes Measurement and Data) --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Monetary economics --- Loans --- Credit --- Capital markets --- Financial markets --- Currencies --- Capital market

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KEY ISSUES Context. Georgia’s previous Fund-supported program, which expired in April 2014, met most of its objectives, in particular by reducing Georgia’s external and fiscal imbalances. The program also helped preserve the central bank’s independence after the 2012–13 political transition and strengthened its inflation-targeting framework. However, over time it proved increasingly difficult to reconcile the program’s fiscal objectives with the new government’s policies of increasing social spending, especially after the economy slowed and revenues fell short in 2013. Also, despite the progress achieved under the program, macroeconomic challenges remain. The current account deficit and external debt are high, leaving the economy susceptible to shocks. Strong and inclusive growth is needed to reduce widespread poverty and high unemployment. More recently, the external outlook has worsened, opening up a balance of payments need in 2014. Program and its objectives. To address these challenges, the authorities request a new three-year SDR 100 million (67 percent of quota) Stand-by Arrangement to address an external financing need in 2014 related in part to the realignment of fiscal policies to more social spending. The program will facilitate Georgia’s external adjustment, reduce key macroeconomic vulnerabilities, rebuild policy buffers, and support growth. Program policies. In 2014, the program balances supporting domestic demand with the need to safeguard external stability. To reduce the output gap, fiscal policy provides a measured stimulus, while monetary policy remains accommodative. However, the authorities will tighten policies and allow the exchange rate to adjust if balance of payments pressures were to intensify. From 2015, the fiscal deficit will be reduced to keep public debt low and to create space for countercyclical policies. This consolidation will rely on raising revenue by broadening the tax base and containing current expenditure, while protecting pro-poor spending and public investment. Monetary policy will aim at price stability through improved inflation targeting. The program will seek to rebuild international reserves while encouraging greater exchange rate flexibility. Strengthening of the financial sector will continue, helped by the recommendations of the recent FSAP mission. The program also aims to contain risks from quasi-fiscal activities and support improvements in tax administration, and will complement the authorities’ reforms to strengthen the business environment, improve education and training, create jobs and reduce poverty and inequality.

International Monetary Fund --- Internationaal monetair fonds --- International monetary fund --- Georgia --- State of Georgia --- Peach State --- Empire State of the South --- جورجيا --- Jūrjiyā --- Cheorchia --- Estato de Cheorchia --- Jôrg·ie --- Corciya --- Джорджия --- Dzhordzhii︠a︡ --- Штат Джорджыя --- Shtat Dz︠h︡ordz︠h︡yi︠a︡ --- Джорджыя --- Dz︠h︡ordz︠h︡yi︠a︡ --- Georgie --- Jóojah Hahoodzo --- Τζόρτζια --- Tzortzia --- Πολιτεία της Τζόρτζια --- Politeia tēs Tzortzia --- Georgio (State) --- État de Géorgie --- Yn Çhorshey --- Çhorshey --- Xeorxia --- Estado de Xeorxia --- Khièu-tshṳ-â --- Jorji --- 조지아 주 --- Chojia-ju --- 조지아주 --- Chojiaju --- 조지아 --- Chojia --- Keokia --- Jorjiạ --- ג'ורג'יה --- G'org'iyah --- מדינת ג'ורג'יה --- Medinat G'org'iyah --- Jeorji --- Djòdji --- Džordžija --- Џорџија --- Жоржиа --- Zhorzhia --- Жоржиа Муж Улс --- Zhorzhia Muzh Uls --- ジョージア州 --- Jōjia-shū --- Jōjiashū --- ジョージア --- Jōjia --- Delstaten Georgia --- Jorjiya --- Georgia suyu --- Джорджія --- Штат Джорджія --- Shtat Dz︠h︡ordz︠h︡ii︠a︡ --- Giorgiye Shitati --- דזשארדזיע --- דזשארדזשיע --- Ìpínlẹ̀ `Georgia --- Džuordžėjė --- 喬治亞州 --- Qiaozhiya Zhou --- 喬治亞 --- Qiaozhiya --- US-GA --- GA --- Economic conditions. --- Economic policy. --- E-books --- Finance --- Funding --- Funds --- Economics --- Currency question --- Georgia (Republic) --- Republic of Georgia --- Sakʻartʻvelo (Republic) --- Sakʻartʻvelos Respublika --- Gruzyah (Republic) --- Cheorchia (Republic) --- Xorxa (Republic) --- Jorjia (Republic) --- Gürcüstan (Republic) --- Gruzie (Republic) --- Gruzínská republika --- Georgien (Republic) --- República de Georgia --- Kartvelio (Republic) --- Gruzio (Republic) --- Gruusia (Republic) --- Georgian tasavalta --- Lýðveldið Georgia --- Géorgie (Republic) --- Geörgje (Republic) --- An tSeoirsia --- tSeoirsia (Republic) --- Xeorxia (Republic) --- Republik Georgia --- Gruzija (Republic) --- Grúzia (Republic) --- Pow Grousi --- Gruzijas Republika --- Gruzja (Republic) --- Giorgia (Republic) --- Gruzínsko (Republic) --- Republika Gruzija --- Đurđija (Republic) --- Gürcistan (Republic) --- Georgän (Republic) --- Gjeorgjia (Republic) --- Грузия (Republic) --- Gruzii︠a︡ (Republic) --- Грузија (Republic) --- Грузія (Republic) --- Hruzii︠a︡ (Republic) --- Республіка Грузія --- Respublika Hruzii︠a︡ --- Γεωργία (Republic) --- Gu̇rzhīstan (Republic) --- Georgija (Republic) --- Georgian S.S.R. --- Economic conditions --- Politics and government. --- Banks and Banking --- Exports and Imports --- Foreign Exchange --- Public Finance --- Industries: Financial Services --- Macroeconomics --- Debt --- Debt Management --- Sovereign Debt --- International Lending and Debt Problems --- Current Account Adjustment --- Short-term Capital Movements --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- International economics --- Public finance & taxation --- Banking --- Currency --- Foreign exchange --- Public debt --- External debt --- Current account deficits --- Loans --- International reserves --- Balance of payments --- Financial institutions --- Central banks --- Debts, Public --- Debts, External