WASHINGTON, July 29, 2010 – The World Bank Board of Executive Directors today approved the US$ 50 million Second Development Policy Operation (DPO-2) for Georgia. This is the second in a series of three operations designed to provide direct budgetary support to back the key objectives of the Government’s policy reform agenda, which are to mitigate the impact of the economic downturn, facilitate recovery, and prepare Georgia for post-crisis growth.
The Second DPO supports an orderly transition in the Government’s focus from immediate mitigating measures toward facilitating recovery and preparing Georgia for post-crisis growth. In addition to the macroeconomic and fiscal framework, the main policy areas supported are improving the efficiency and effectiveness of public finances, increasing the effectiveness of the social safety net, and enhancing external competitiveness.
“With the support of the package of reforms backed by this Operation, Georgia’s economic recovery is gaining strength,” said Asad Alam, World Bank Regional Director for the South Caucasus. “Tax, customs, and trade-related reforms are helping to strengthen competitiveness and bolster investor confidence, while the coverage of the social safety net is being enhanced to help support the incomes of the poor and vulnerable.”
“As economic recovery takes hold, fiscal adjustment is being implemented in a manner that protects important social and infrastructure investment expenditures,” added Faruk Khan, Task Team Leader of the DPO program. “Reforms to improve the results orientation of the budget and to strengthen capital budgeting, as required under the newly enacted Budget Code, further reinforce the effort to implement quality fiscal adjustment.”
This Operation follows the US$ 85 million First DPO, which supported a countercyclical fiscal stimulus to mitigate the economic downturn during 2009. The DPO program is a central component of the World Bank’s Country Partnership Strategy for Georgia, which is built upon the twin pillars of meeting vulnerability needs related to the downturn and strengthening competitiveness for growth and job creation.
The Second DPO includes an IDA credit of US$ 40 million equivalent and an IBRD loan of US$ 10 million. The IDA credit carries a maturity of 20 years including a grace period of 10 years and the IBRD loan carries a maturity of 27 years including an 8 year grace period.
World Bank commitments to Georgia total approximately US$ 1.4 billion for 49 projects.