Bloomberg News

Georgia Won't Use $386 Million IMF Loan

June 04, 2012

Georgia won’t use funds from a $386 million International Monetary Fund stand-by facility as the economy remains resilient to the effects of the euro region’s sovereign-debt crisis, Prime Minister Nika Gilauri said.

Georgia will weather the turmoil better than many eastern European and central Asian nations, Gilauri said yesterday in an interview in Istanbul. The $11.7 billion economy will grow 6 percent to 7 percent this year, after expanding 7 percent in 2011 and 6.5 percent in 2010, Gilauri said.

“We won’t draw down” from the facility, Gilauri, 37, said. “There is no need whatsoever. These are funds which are precautionary.”

A previous IMF loan of $750 million for Georgia awarded in September 2008, which was later raised to $1.2 billion and expired in June 2011, helped cushion the Black Sea nation’s economy from the global financial crisis that followed the collapse of Lehman Brothers Holdings Inc. International aid of more than $5 billion received after a five-day war with Russia in 2008 also supported the recovery.

The two-year IMF loan to which Georgia agreed in April will help reassure foreign investors and other international lenders such as the World Bank (NKWGRAU) “because of this volatile political and economic situation” in the euro region, Gilauri said.

The euro region’s debt crisis “does have negative effects on everybody,” he said, adding that Georgia has diversified its exports, which gives its more resilience. China, India, Turkey, Azerbaijan and Ukraine as well as the EU are among its main trading partners, he said.

“We don’t expect the European debt crisis to significantly affect the Georgian economy,” Gilauri said.

Parliamentary elections in October and a presidential vote next year won’t change the government’s plans to reduce the budget deficit as planned, Gilauri said.

Georgia has reduced the shortfall to 3.5 percent of gross domestic product this year from 9.5 percent in 2010 and plans to further lower it to 3 percent or less next year, he said.

To contact the reporters on this story: Agnes Lovasz in London at alovasz@bloomberg.net; Helena Bedwell in Tbilisi at hbedwell@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net


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