Reform Loan (PBL) to strengthen the competitiveness and crisis resilience of the Georgian economy

completed

The project includes financial support for the Georgian government in economic reforms to improve competitiveness and crisis resilience. For this purpose, a reform loan (Policy Based Lending, PBL) in the form of an FC loan is to be provided by KfW. This reform loan is embedded in a program coordinated by the IMF and builds directly on the World Bank's Development Policy Operation (DPO) Economic Management and Competitiveness. The basis of the PBL is a policy matrix agreed between KfW and the Georgian government in which reform measures to strengthen the competitiveness and crisis resilience of the Georgian economy are defined. The FC loan will be closed and the FC loan funds will be paid into the Georgian state budget when the objectives formulated in the matrix have been sufficiently met. The agreed reform measures (including in the areas of public financial management, public procurement, competition law and the promotion of foreign direct investment) are an important prerequisite for making Georgia fit for international competition in the long term. In addition, the project will help to preserve the substance of the Georgian economy during the Covid-19 crisis and enable a rapid revival after its end. The target group of the project is the entire population of Georgia, with a special focus on employees and employers affected by the effects of the Covid-19 crisis. The project sponsor and borrower of the Federal Development Cooperation Loan (FöK) is the Republic of Georgia, represented by the Georgian Ministry of Finance, which will actively support cooperation with the relevant line ministries (especially the Ministry of Economy and Sustainable Development, MoESD). According to the partner's cost estimates, the total cost of the project is around EUR 1.1 billion. To finance the project, an FC development loan of up to EUR 180 million is to be made available. A total of up to EUR 90 million is to be made available through the World Bank in two tranches. There is close coordination between the international financing institutions active in Georgia and KfW. The Georgian government intends to limit new debt and has therefore proposed re-prioritizing the FC development loan commitment with KfW. Parallel to the conclusion of the contract for the current development loan, two existing and not yet disbursed development loans will be reduced by mutual agreement (municipal water infrastructure Batumi EUR 60 million and the second tranche of the gas storage project - Georgia Oil & Gas Coorporation, up to EUR 90 million).