IMF Resident Representative: Two Scenarios for Stand-by Arrangement Revival

On March 19, the International Monetary Fund’s (IMF) Resident Representative for Georgia, Andrew Jewell, said that the delayed Stand-by Arrangement /SBA could be canceled due to lack of time for renegotiation. According to Jewell, the arrangement could be continued if the government showed a willingness to live up to past commitments, including the consideration of IMF-suggested reforms in the law on state-owned enterprises (SOEs).

The IMF-supported program originally included a three-year stand-by arrangement with a loan of $289 million. After the completion of the first tranche of $40 million, Georgia was due to receive the second tranche this summer, but the IMF postponed the submission and Board approval of the second review of Georgia’s Stand-by Arrangement /SBA, stating that the delay in Board approval was “partly due to disagreement over a change in the NBG’s management structure”.

In a commentary for Business Media, Andrew Jewell noted that the IMF-supported program is for three years and expires in June 2025. Because 2024 is a parliamentary election year, Jewell suggested that Georgia may not be able to implement financial reforms, so instead of renegotiating the delayed Stand-by Arrangement /SBA, it may be more beneficial for Georgia to wait until after the elections and then begin negotiations for a new program in 2025.

Therefore, Jewell suggested two scenarios: if the government wants to revive the program, the IMF is ready to present the measures that need to be implemented; on the other hand, if it believes that now is not the right time and is unwilling to live up to past commitments, then starting talks on a new program next year will be more effective.

Andrew Jewell also mentioned the draft law on state-owned enterprises (SOE), which is not fully in line the reform strategy developed by the IMF and the World Bank in 2022 and agreed by the Georgian government. He noted that the government has reservations about taking on the commitments it made by signing the strategy document two years ago and that negotiations are underway to find other ways to address the problems in the SOE legislation.

According to Jewell, it is important to make the sector more efficient, to ensure the necessary financial oversight powers of the Ministry of Finance over state-owned enterprises, and to divide the ownership of these enterprises between the Ministries of Economy and Finance, which the Ministry of Economy does not agree with.

In a separate commentary to Business Media, the Minister of Economy and Sustainable development, and Vice Prime Minister of Georgia, Levan Davitashvili stated that the revival of the Stand-by Arrangement /SBA doesn’t depend on the reform of SOE law. He noted that the IMF suggested changes have already been tested in a pilot regime.

“As a result, many nuances have been identified that should be reflected in the final legislation, including how state-owned enterprises should be managed and, of course, and their ownership. This is a very complex issue because these are important corporations that are the backbone of our country’s economy. Therefore, we have had a very open dialogue with our partners, the World Bank has been actively involved in this process, this dialogue is continuing, because the model should be clear, well- organized and serve the economic interests of Georgia. This is what we are talking about with the IMF, they understand it. This cannot be done quickly, in one day,” – stated Levan Davitashvili.

Also Read:

• 19/03/2024 – IMF Calls for Bolstering Judicial System, Anti-corruption Authority in Staff Concluding Statement
• 04/10/2023 – IMF: Stand-by Arrangement Delayed, Not Suspended
• 27/09/2023 – EU Ambassador: “We Sincerely Hope that IMF Program will be Restored”
• 27/09/2023 – Acting NBG President Confirms IMF Program Suspension

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