Commission proposes fresh macro-financial assistance to Georgia of up to €45 million

 The European Commission today proposes new Macro-Financial Assistance (MFA) to Georgia, worth up to €45 million. If adopted by the European Parliament and the Council, this assistance would help Georgia cover part of its external financing needs.

While Georgia has made significant progress with economic reforms, its macroeconomic outlook remains vulnerable. Georgia's economy is exposed to an uncertain regional and global economic outlook, and its international reserves are not yet adequate, not least due to the country's external debt level. This context has formed the base for the proposal for further Macro-Financial Assistance.

Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs, said: "Today's proposal for additional assistance is another sign of the EU's strong support for the Georgian people. As Georgia continues its economic transition, we are helping the country to preserve macroeconomic stability and continue the reform process, which is needed to achieve stronger and more inclusive growth."

The proposed Macro-Financial Assistance would accompany the country's programme with the International Monetary Fund (IMF), approved on 12 April 2017. Of the total €45 million, €10 million would be provided in the form of grants and up to €35 million in medium-term loans at favourable financing conditions, helping to reduce uncertainties surrounding the economy's short-term balance of payments and fiscal issues.

Disbursements under the proposed MFA programme would be strictly conditional on the implementation of specific policy conditionality to be agreed between Georgia and the EU, and set out in a Memorandum of Understanding, and on good progress with the IMF programme. These policy conditions would aim to address some of the weaknesses of the Georgian economy. They would also complement the reforms agreed in the context of the EU's budgetary and other support operations, and the EU-Georgia Association Agreement which envisages the creation of a Deep and Comprehensive Free Trade Area (DCFTA).

Background

Macro-Financial Assistance

MFA is an exceptional EU crisis response instrument available to the EU's neighbouring partner countries. It is complementary to assistance provided by the IMF. MFA loans are financed through EU borrowing on capital markets. The funds are then lent on with similar financial terms to the beneficiary countries. MFA grants come from the EU budget.

The proposed MFA to Georgia is meant to complement a new programme agreed between the country and the IMF and is to be disbursed in two instalments in 2018.

The new MFA operation is the third since Georgia's military conflict with Russia in August 2008. At an International Donors' Conference in Brussels in October 2008, the EU pledged two MFA operations of €46 million each. The first of those operations (€46 million, fully in the form of grants) was implemented in 2009-2010 and the second (again 46 million - half in grants, half in loans) in 2015-2017. The last tranche of the second operation was disbursed in May 2017.

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