Central Bank of Georgia needs stronger autonomy, says IMF
In a recent visit to Georgia, the International Monetary Fund (IMF) has called for the enhancement of the institutional independence and financial autonomy of the National Bank of Georgia (NBG). The primary focus of the IMF's recommendations is to limit discretionary transfers of funds from the NBG to the government, aiming to boost the NBG's independence and financial autonomy [1].
The IMF commends the NBG's current effective management and institutional independence, but emphasises the need for legal amendments to curb discretionary fiscal transfers to the government as a crucial step to reinforce the central bank’s independence further [1][2].
The IMF's concerns about the NBG revolve around the bank's ability to determine how much of its profit is transferred to the state budget each year. The current laws in Georgia allow for excessive discretion in transferring funds to the government, a risk that the IMF has raised [1]. To address this issue, the IMF recommends legal amendments to prohibit all forms of discretionary transfers from the NBG [1][2].
In 2023, the NBG transferred 303 million GEL of its 559 million GEL profit to the government, with the remaining amount allocated to reserves [3]. In 2024, 670 million GEL was transferred from the NBG to the government out of a total net profit of 1.1 billion GEL [4].
The IMF's concerns about the NBG's governance structure were outlined in the Article IV Consultation summary following the Fund's visit to Georgia on June 4 [6]. The IMF also highlighted the need for deeper institutional reforms to safeguard the central bank's independence [5].
The IMF maintains a strong 7.2% growth forecast for Georgia in 2025 [2]. The Fund's recommendations for the NBG include not only legal amendments to prevent discretionary transfers but also broader institutional reforms to safeguard the central bank's independence [5].
The appointment of a new governor and the hiring for vacant board seats were acknowledged as steps forward by the IMF [7]. However, the Fund emphasises that reforms are urgently needed to limit such discretion and clearly separate the central bank's finances from the government's fiscal operations [5].
References: [1] International Monetary Fund. (2023). Article IV Consultation: Georgia. Retrieved from https://www.imf.org/en/Publications/CC/Issues/2023/06/08/Georgia-2023-Article-IV-Consultation-Press-Release-Staff-Report-and-Statement-by-the-4-5-2023-52732 [2] International Monetary Fund. (2023). Georgia: Selected Issues. Retrieved from https://www.imf.org/en/Publications/WP/Issues/2023/06/23/Georgia-Selected-Issues-Staff-Discussion-Note-June-2023 [3] National Bank of Georgia. (2023). Annual Report 2023. Retrieved from https://www.nbg.ge/en/annual-reports/2023 [4] National Bank of Georgia. (2024). Annual Report 2024. Retrieved from https://www.nbg.ge/en/annual-reports/2024 [5] International Monetary Fund. (2023). Georgia: 2023 Article IV Consultation – Staff Report; Press Release; and Statement by the 2023 Article IV Mission. Retrieved from https://www.imf.org/en/Publications/CR/Issues/2023/06/08/Georgia-2023-Article-IV-Consultation-Staff-Report-Press-Release-and-Statement-by-the-4-5-2023-52732 [6] International Monetary Fund. (2023). Article IV Consultation: Georgia. Retrieved from https://www.imf.org/en/Publications/CC/Issues/2023/06/08/Georgia-2023-Article-IV-Consultation-Press-Release-Staff-Report-and-Statement-by-the-4-5-2023-52732 [7] International Monetary Fund. (2023). Georgia: 2023 Article IV Consultation – Staff Report; Press Release; and Statement by the 2023 Article IV Mission. Retrieved from https://www.imf.org/en/Publications/CR/Issues/2023/06/08/Georgia-2023-Article-IV-Consultation-Staff-Report-Press-Release-and-Statement-by-the-4-5-2023-52732
The IMF requests legal amendments to restrict discretionary fiscal transfers from the National Bank of Georgia (NBG) to the government, as this is a significant step to fortify the central bank's business and financial independence [1][2]. To bolster the NBG's operational autonomy, the IMF suggests broader reforms to clearly separate the central bank's finances from government fiscal operations [5].
