Georgia: First Development Policy Operation (DPO-1)

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The First Development Policy Operation (DPO) Program series is the central component supporting structural reforms in Georgia of the upcoming country partnership strategy covering 2010-13. The DPO is directed at supporting reforms to: (i) mitigate the impact of the economic downturn in the short-term; and (ii) facilitate recovery and prepare Georgia for post-crisis growth in the medium-term. Strong reforms following the rose revolution in 2003 led to four years of rapid economic growth during 2004 through mid- 2008, although significant challenges remained in creating the conditions to continue along a trajectory of sustained economic growth with an effective social safety net. Furthermore, the growth momentum over the last four years has been interrupted by the severe double shocks to the economy from the August 2008 conflict and the subsequent global economic crisis. This has led to the dual challenge of mitigating the impact of the downturn in the short term and facilitating recovery and creating the conditions for post-crisis growth with an effective social safety net in the medium term. For operational purposes, in addition to a satisfactory macro-fiscal framework, the program is organized into three reform pillars: (a) improving the efficiency and effectiveness of public finances; (b) improving the effectiveness of the social safety net; and (c) improving external competitiveness.