Decision 2018/598 - Further macro-financial assistance to Georgia - Main contents

EN

Official Journal of the European Union

L 103/8

Relations between the European Union (the ‘Union’) and Georgia continue to develop within the framework of the European Neighbourhood Policy (ENP) and the Eastern Partnership. Georgia joined the EU's Eastern Partnership in 2009, which was followed by the negotiation of an EU-Georgia association agreement. That agreement (2) (the ‘Association Agreement’), which includes the gradual introduction of a Deep and Comprehensive Free Trade Area (DCFTA), was signed in June 2014 and entered into force on 1 July 2016.

Georgia continues to face a weak external environment, which, through reduced exports and remittances, has contributed to the relatively subdued GDP growth in 2016. Whilst regional and global growth picked up in 2017, it remains subject to downside risks.

Georgia's fiscal deficit remains significant, and its public debt-to-GDP ratio is increasing. Georgia's balance of payments position also remains vulnerable due to a very large current account deficit and high external debt. Georgia's foreign exchange reserves have been stable in absolute terms but, in the face of rising reserve needs, they have fallen below the level estimated by the International Monetary Fund (IMF) as adequate. Georgia also continues to adapt to the requirements of the DCFTA with the Union.

In this context, the Georgian authorities and the IMF agreed, in April 2017, on a three-year Extended Fund Facility (EFF) arrangement in the amount of USD 285,3 million for the period 2017-2020. The arrangement was approved by the IMF Executive Board on 12 April 2017. The aim of the EFF arrangement is to support an economic reform programme which will help Georgia reduce its economic vulnerabilities, and promote higher and more inclusive economic growth.

In view of Georgia's residual external financing needs, the Georgian authorities requested complementary macro-financial assistance from the Union in June 2017.

Since the military conflict with Russia in August 2008, Georgia has benefitted from two macro-financial assistance operations pledged by the Union at the International Donors' Conference in Brussels in October 2008. The first of those operations, which was of an amount of EUR 46 million made entirely in the form of grants, was implemented in 2009-2010. The second, which was again for an amount of EUR 46 million, made half in grants and half in loans, was implmented in 2015-2017. The Union has also made EUR 610-746 million available to Georgia under the European Neighbourhood Instrument for the period 2014-2020, including budgetary support and technical assistance. In addition, Georgia benefits from the Neighbourhood Investment Facility which contributed approximatly EUR 86 million to projects in Georgia during the period of 2008-2017.

Given that Georgia is a country covered by the ENP, it should be considered to be eligible to receive macro-financial assistance from the Union.

The Union's macro-financial assistance should be an exceptional financial instrument of untied and undesignated balance-of-payments support, which aims at addressing the beneficiary's immediate external financing needs and should underpin...