World Bank Supports Georgia’s Reform Agenda with First Development Policy Operation

July 2, 2009

WASHINGTON, July 2, 2009 – The World Bank Board of Executive Directors today approved the US$ 85 million First Development Policy Operation (DPO-1) for Georgia. This is the first in a series of three operations designed to provide direct budgetary support to back the Government’s policy reform agenda.

The DPO series supports key reforms directed at: (i) mitigating the impact of the current economic downturn in the short-term; and (ii) facilitating recovery and preparing Georgia for post-crisis growth in the medium-term. In addition to a satisfactory macroeconomic and fiscal framework, the main policy areas supported are improving the efficiency and effectiveness of public finances, improving the effectiveness of the social safety net, and improving external competitiveness.

“This Operation is a central component of the upcoming Country Partnership Strategy (CPS) for Georgia covering 2010-2013," said Asad Alam, World Bank Regional Director for the South Caucasus. “It supports a short-term fiscal stimulus and provides for an expansion of the social safety net for the poor and vulnerable at a time when they are hurt from the loss of jobs and incomes and from internal displacement.”

“In order to prepare Georgia for post-crisis growth, the DPO program supports a package of reforms to bolster investor confidence, enhance Georgia’s integration with world markets, and improve the efficiency of public expenditures," added Faruk Khan, Task Team Leader of the program. “This will enable a vibrant and competitive private sector to serve as the engine of recovery and growth in the medium term.”

Under the Government’s fiscal stimulus supported by the program, public expenditures are being scaled up and reallocated toward social and infrastructure investments to support economic activity in the short-term. In addition, the amount of the targeted social assistance (TSA) benefit has been increased through a doubling of the top-up per family member from GEL 12 to GEL 24 per month as of January 2009. The coverage of the Medical Insurance Program (MIP) targeted to the poor has also been increased from 750,000 beneficiaries in 2008 to 900,000 beneficiaries in 2009.

Under the package of structural reforms being supported to create the conditions for medium-term growth, Georgia’s tax payment system and customs procedures will be further streamlined. The efficiency of public expenditures will be improved by enhancing the results-orientation of the budget and by enhancing the effectiveness of the public investment program.  Finally, reforms to the statistics system will provide reliable and timely information to investors and policymakers.
Since the inception of its program in Georgia in 1995, the World Bank has financed 46 projects with total commitments up to $1.15 billion. The current portfolio consists of 11 active projects with commitments up to $295.3 million.

New IDA credits carry a maturity of 20 years, including a grace period of 10 years.

Media Contacts
In Tbilisi
Inga Paichadze
Tel : (99532) 91 30 96 / 91 26 59
In Washington
Michael Jones
Tel : (202) 473-2588