Georgia’s economic recovery “is gaining strength”, but “risks remain” as demonstrated in reduced inflow of foreign direct investments in the first quarter of 2010, International Monetary Fund (IMF) said.
IMF executive board completed sixth review of Georgia’s economy on July 9 and granted Georgia further USD 74.8 million as part of Stand-by Arrangement (SBA) with initial amount of USD 750 million, which was then increased to USD 1.1 billion and extended to June, 2011.
IMF executive board noted that it was granting Georgia a waiver for the nonobservance of criterion on the floor on the net international reserves of the National Bank and on the ceiling on cash deficit.
IMF welcomed, what it called, “a decision” of the Georgian government “to postpone the implementation of a referendum requirement on tax increases” – proposal, which is a part of package known as Act of Economic Liberty.
Parliament passed the proposal with first reading on December 25, 2009; but this constitution amendment has been shelved since then. The proposal, which requires to be passed with second and third reading, is binding the government to hold a referendum if it decides to increase income tax; profit tax; value added tax and customs tax or if the government decides to introduce a new tax.
IMF said that the government’s decision to postpone implementation of this proposal “will help maintain the necessary policy flexibility until the fiscal deficit has returned to more prudent levels.”