Mr. Mark A Horton, Hossein Samiei, Mr. Natan P. Epstein, and Mr. Kevin Ross
Since late 2014, exchange rates (ERs) and ER regimes of the Caucasus and Central Asia (CCA) countries have come under strong pressure. This reflects the decline of oil and other commodity prices, weaker growth in Russia and China, depreciation of the Russian ruble, and appreciation of the U.S. dollar, to which CCA currencies have historically been linked. Weaker fiscal and current account balances and increased dollarization have complicated the picture. CCA countries entered this period with closely managed ER regimes and, in many cases, currencies assessed by IMF staff to be overvalued. CCA central banks have price stability as their main policy objective, and most have relied on ER stability to achieve this objective. Thus, the first policy response involved intervention in local foreign exchange (FX) markets, often with limited communication. In this context, the IMF staff has reviewed ER policy advice and implementation strategies for CCA countries.
This paper focuses on Georgia’s Second Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility (PRGF), a Request for Waiver of Performance Criteria, and a Request for Rephasing of Disbursements. The IMF staff considers that recent strong macroeconomic performance in a difficult external environment and efforts to reestablish the momentum of key structural reforms warrant completion of the second review. The IMF staff supports authorities’ request for waivers of performance criteria and their request for higher disbursements.
This paper focuses on the Republic of Armenia’s 2002 Article IV Consultation, First and Second Reviews Under the Poverty Reduction and Growth Facility (PRGF), and a Request for Waiver of Performance Criteria. The PRGF-supported program approved in 2001 focuses on revenue mobilization, the clearance of government arrears, and a decline in the deficit of the energy sector. Performance during the first year of the program was mixed. Tax collection was sluggish, and delays with structural reforms in the energy, water, and irrigation sectors led to the nonobservance of several quantitative performance criteria under the program.
Georgia's medium-term economic goals are to reestablish fiscal and external sustainability and reduce poverty. The conduct of monetary policy has remained sound. Fiscal consolidation has been supported by important measures to strengthen public expenditure management and improve fiscal transparency. Measures to combat corruption, restructure the energy sector, and privatize key enterprises must be accelerated in order to underpin faster growth and poverty reduction. Georgia's efforts to restore its solvency will require continued international support, including further concessional lending and external debt rescheduling.
The centerpiece of the program is fiscal consolidation, to put Georgia on a path to fiscal sustainability, establish the ability of the government to meet its commitments, and underpin efforts to resolve the large external debt burden. Expenditure restraint should be complemented by reforms to increase fiscal transparency and strengthen expenditure monitoring and control. Maintaining low inflation and a stable exchange rate is required. Combating corruption and improving governance will be the key to attracting the investment needed to ensure strong, sustainable growth and poverty reduction.
This paper provides an overview of recent economic developments in Georgia. The country has made significant, but incomplete, progress toward establishing the rule of law. The rapid accumulation of wage and social transfers arrears is one of the factors of the worsening poverty. The banking sector reforms have started to yield positive results, particularly with regard to banking system consolidation. The energy sector exchange, trade and payments systems, tax summary, and statistical data on the economic indices of Georgia are presented in the paper.
This paper describes economic developments in the Republic of Armenia during 1990s. The lagged effects of the more expansionary stance of late 1996, combined with real shocks in early 1997, especially poor weather, and a loss in the momentum in structural reform, particularly privatization, led to a slowdown in growth to about 3 percent during the first nine months of 1997 compared with the same period in 1996. Inflation, measured by the 12-month increase in consumer prices, rose to 23 percent by end-September 1997 from 16½ percent a year earlier.
This paper examines the level and structure of fiscal revenues from the Baltics, Russia, and other former Soviet Union countries’ (BRO) energy sector and suggests reforms in energy tax policy. Revenues from the oil and gas sectors are about half the level that might be expected from international comparisons. Low oil revenues result from infrastructure constraints on oil exports, weak tax administration, and inappropriate tax structures. Low gas revenues are due to low statutory tax rates, a tax structure that does not capture monopoly or resource rents, and weak tax administration. Taxation of oil products could be increased.
This paper reviews economic developments in Georgia during 1990–96. Following the implementation of tight financial policies and the liberalization of prices, trade, and the exchange system, growth resumed in 1995 and accelerated in 1996, against the background of a stable exchange rate and declining inflation. At the same time structural reform continued to advance, laying the ground for increased private sector activity and sustained growth in the medium term. Following the introduction of the lari in October 1995, a gradual remonetization of the economy took place, and gross international reserves were replenished.
Ukraine has made impressive progress in restructuring and stabilizing its economy over the past two years, and yet much remains to be done to revive output and establish a market economy. The 16 papers included in this volume, edited by Peter K. Cornelius and Patrick Lenain, were presented at a seminar sponsored by the IMF and the World Bank in July 1996, which brought together government officials, academics, and staffs of international organizations to discuss a comprehensive medium- term strategy for Ukraine. The papers cover the medium-term macroeconomic framework; wages, poverty, and social safety net reform; private sector development; trade policies and sectoral reforms; and institution building and good governance.