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Document o f The World Bank
FOR OFFICIAL USE ONLY
Report Number: 43354-GE
INTERNATIONAL DEVELOPMENT ASSOCIATION
AND
INTERNATIONAL FINANCE CORPORATION
COUNTRY PARTNERSHIP STRATEGY PROGRESS REPORT
FOR
GEORGIA
FOR THE PERIOD FY06 - FY09
May 6,2008
South Caucasus Country Unit Europe and Central Asia Region
This document has a restricted distribution and may be used by recipients only in the performance o f their official duties. Its contents may not otherwise be disclosed without World Bank Authorization.
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AA AAA BEEPS
CPS CEM CIS CPIA DFID EBRD ENP EU FA0 FDI FIAS FSAP FSU FY GDP GEF GNI GoG GTZ IBRD IDA IDF IEG
DATE OF LAST CPS FOR GEORGIA
September 2005
CURRENCY EOUIVALENTS (Exchange Rate Effective April 10,2008)
US$1 = L A N 1.45
GOVERNMENT FISCAL YEAR
January 1 to December 3 1
ABBREVIATIONS AND ACRONYMS
Amelieration Association Analytic & Advisory Activities Business Environment & Enterprise Performance Survey Country Partnership Strategy Country Economic Memorandum Commonwealth of Independent States Country Policy and Institutional Assessment Department for International Development European Bank for Reconstruction & Dev European Neighborhood Policy European Union Food and Agriculture Organization Foreign Direct Investment Foreign Investment Advisory Service Financial Sector Assessment Program Former Soviet Union Fiscal Year Gross Domestic Product Global Environment Facility Gross National Income Government o f Georgia German Technical Cooperation Agency Int’l Bank for Reconstruction & Development International Development Association Institutional Development Fund Independent Evaluation Group
IFRS IFAD IFC IMF JSAN KfW LIL LSMS MDG MIGA MTEF NBG NGO OECD PER PIU PEFA PRSO PRSP S I L SME SPA TA UNDP
Int’l Financial Reporting Standards International Fund for Agricultural Development International Finance Corporation International Monetary Fund Joint Staff Advisory Note German Development Bank Learning and Innovation Loan Living Standards Measurement Survey Millennium Development Goal Multilateral Investment Guarantee Authority Medium Term Expenditure Framework National Bank of Georgia Non-Governmental Organization Org. for Economic Cooperation & Development Public Expenditure Review Project Implementation Unit Public Expenditure and Financial Accountability Poverty Reduction Support Operation Poverty Reduction Strategy Paper Sector Investment Loan Small and Medium Enterprise State Procurement Agency Technical Assistance United Nations Develooment Program
UNHCR United Nations High Cbmmissio:er for Refugees
USAID US Agency for International Development VAT Value Added Tax WBI World Bank Institute
The Wor ld Bank Group Team IBRD and IDA I F C
Vice President: Shigeo Katsu Regional Vice President: Declan Duff Country Director: Donna M. Dowsett-Coirolo Director: Jerome Sooklal Team Leader: Anthony Cholst Team Leader: L isa Kaestner
Table of Contents
I. Recent Developments ........................................................................................................ 1 A. Political and Economic Developments ... . . . . .. . .. . .. . . . . . . . . .. . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... . . . . . . . . . . . 1
B. Reform Program ............................................................................................................. 2
C. Poverty ............................................................................................................................ 3
The World Bank Group Country Partnership Strate gy............................................... 4 A. Progress and Adjustments to the Results Matrix ............................................................ 4
B. The Bank’s Lending and Analytic Work Progr ........................................................... 8 C. IFC Programs .................................................................................................................. 8
D. Partnerships ................................................................... ...................................... ........... 9 111. The CPS Program Going Fonrard....................... .......................................................... 9 IV. Ris ................................................................................................................................... 10
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Annexes Annex: 1 - Progress Towards Achieving the CPS Matrix ........................................................ 11 Annex: 2 - Progress in Achieving the MDGs ........................................................................... 28 Annex: 3 - The Government’s Five Year Strategy ................................................................... 29
Basic CAS Annexes:
Georgia At a Glance Selected Indicators o f Bank Portfolio and Management IBRD/IDA Program Summary IFC Investment Operations Program Summary o f Non-lending Services Key Economic Indicators Georgia Social Indicators Key Exposure Indicators Operations Portfolio (IBRDIIDA and Grants) Committed and Disbursed Outstanding Investment Portfolio
i
FOR OFFICIAL USE ONLY
This document has a restricted distribution and may be used by recipients only in the performance o f their off icial duties. I t s contents may not be otherwise disclosed without Wor ld Bank authorization.
Country Partnership Strategy Progress Report F o r Georgia for FY06-09
1. This Country Partnership Strategy Progress Report (CPSPR) assesses progress in implementing the FY06-09 Country Partnership Strategy (CPS) for Georgia, discussed by the Board in September 2005 (Report No. 33295-GE). The main elements o f this CPSPR were discussed with the Government in March 2008.
I. Recent Developments
A. Political and Economic Developments
2. T h e political environment i s evolving. Georgia enjoyed a relatively stable first four years following the 2003 Rose Revolution, and during this period the government undertook significant governance, economic and social reforms, with impressive results. At the same time, some discontent slowly emerged over limited consultation with non-government stakeholders and perceptions o f heavy-handedness in applying the rule o f law. These tensions peaked in late 2007 when the Government used force against opposition demonstrations, and imposed a brief state o f emergency. To reassess the extent o f i t s mandate, the Government advanced Presidential and Parliamentary elections from Fall 2009 to January and May 2008, respectively. President Saakashvili won a second term, and Parliamentary elections are set for May 2 1. These may lead to somewhat more diversity in the Parliament and hence a greater need for consensus-building and coalitions, which in turn would be a natural and welcome part o f the political development process.
3. On the geo-political front, tensions with neighboring Russia have increased over a broad range o f issues, severely limiting trade and transport between the two; and conflicts related to the break-away regions o f Abkhazia and South Ossetia remain unresolved. On the other hand, relations with other regional partners involved in the Central Asia-South Caucasus transit corridor have steadily strengthened, and in 2006 Georgia signed a European Neighborhood Policy (ENP) Action Plan, enhancing cooperation with the European Union.
4. Economic growth has been exceptionally strong. GDP growth has been higher than projected in the CPS, with actual growth amounting to 9.4 percent in 2006 and an estimated 12.4 percent in 2007, led by construction, financial intermediation, communications and, more recently, manufacturing. Underlying this has been a rapidly improving business climate and increasing inflows o f foreign direct investment (FDI), which almost doubled from 8.4 percent o f GDP in 2005 to an estimated 16 percent in 2006-07. In addition, decisive anticorruption measures and improvements in both tax policy and tax administration have resulted in an increase in tax collection from 14 percent o f GDP at the time o f the Rose Revolution to 22 percent in 2006 and about 25 percent in 2007. Higher revenues have provided the space for investments in infrastructure and other services, which in turn have contributed to growth.
5. Macroeconomic management has been largely effective in safeguarding stability and growth in the face o f strong capital inflows and external shocks. Inflation was maintained in single digits through the first half o f 2007, but crept into double digits late in 2007 (1 1 percent)
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largely due to rising energy and food prices, as well as large capital inflows. The fiscal deficit was 2.5 percent o f GDP during 2005-2006 and moved into a surplus during the f i rst hal f o f 2007. However, a spike in expenditures late in the year resulted in a deficit o f 4.3 percent o f GDP for 2007. The authorities intend to move to a balanced budget and also tighten monetary policy in the medium term. As a result, inflation i s expected to decline to single digits in 2008 and beyond. Strong capital inf lows have fueled a large current account deficit o f 13.8 percent o f GDP in 2006 and 18 percent in 2007. This i s expected to moderate in the medium term with tighter fiscal and monetary pol icy and export growth. The external debt burden has fallen from 46 percent o f GDP in 2003 to 16.7 percent in 2007. In light o f Georgia’s strong macroeconomic performance, in April 2008 it successfully floated its first sovereign bond issue o f $500 million, which was heavily oversubscribed. The IMF successfully completed the sixth and final PRGF review in 2007.
2000-2002 2003 2004 2005 Real GDP growth (%) 2.0 - 5.5 11.1 5.9 9.6
2006 2007 2008-2011~ 9.4 12.4 7.0-9.0
CPI inflation (%, e.0.p.) I 3.4 - 5.4 I 7.0 I 7.5 I 6.2 I 8.8 1 11.0 I 8.0- 10.0 Revenues and grants (% o f GDP) I 15.5 - 16.1 I 15.6 I 22.0 I 23.3 I 26.2 I 29.5 I 26.4 -28.5
GNI per capita (US$, atlas method) I 700-730 I 860 I 1060 I 1330 I 1560 I 1990 I 2420-3900 I
B. Reform Program
6. During 2006-2007, the Government made important strides in improving public administration. O n budget reform, it developed a strategic document identifying priorities and a budget envelope to achieve these objectives in a multi-year framework. The Basic Data and Directions (BDD) was first produced in 2005 and has been updated annually. The Government also started the development o f the Medium Term Expenditure Framework f i rs t covering five pi lot ministries and today it covers al l spending units. The Government i s now developing a results-oriented budget. In addition, a l l expenditures and revenues now go through the Treasury Single Account which provides accurate information in real time.
7. On revenues, tax and customs were consolidated into a single department and payments simplified with nearly al l payments to the state being done through commercial banks. Customs procedures have been streamlined and now use a risk management approach. The new Customs code, effective January 2007, consolidates import tariffs into just three categories, with 90 percent o f goods set at 0%. A major tax reform was also implemented in 2005-07: exemptions were eliminated, the number o f rates reduced from 11 to 5, a flat income tax adopted, and tax rates reduced. In 2007, new rules for inter-governmental finances were introduced, and new legislation in 2008 has introduced a rule-based approach to balancing the budget which will help strengthen fiscal discipline. At the same time, institutional strengthening i s needed, including for the Chamber o f Control, State Procurement Agency, and dispute settlement mechanisms.
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8. Progress on the business climate and infrastructure has been even more dramatic. Business registration, licensing, and inspection requirements have been significantly streamlined. For example business registration now takes only 11 days and the number o f licenses needed was cut from 909 to 158. In 2003, the national average for electricity service was only 7 hours per day per household and collections averaged 35 percent. Today, electricity service i s provided close to 24 hours a day/7 days a week to paying customers and collections are above 85 percent.
9. The financial sector i s growing rapidly and there are no entry barriers to banks: several international banks including SociCtC GCnCrale and HSBC have recently entered the sector. In March 2008 Parliament approved a new legislation to modernize the financial sector including: (i) establishing a single Financial Supervisory Authority (FSA) for the banking and non-banking sectors (capital markets and insurance); (ii) strengthening the independence o f the Central Bank, with first steps towards inflation targeting, (iii) creating two funds, one for stabilization and the other for long tem financing, and (iv) development o f an international financial center to attract foreign funding; which will require close monitoring
10. Social reforms have also been significant. As in other reforms o f the state, the reforms in the social sectors included measures to eliminate the pervasive practice o f bribery o f the past including restructuring o f public institutions, reducing the number o f public employees, increasing salaries, and providing training. In education, the introduction o f the annual examination has eliminated the practice o f bribery to get admission. Curriculum has been improved and overcapacity in education facilities has been reduced which will result in better equipped schools and better paid teachers. In health, the Basic Benefit Package (BBP) providing health care coverage was rationalized and access and quality o f health care services are improving. A targeted Social Protection package was introduced in September 2006. Pensions have also been increased during the CPS period.
C. Poverty
11. Assessing the impact o f economic growth and social spending on poverty i s a work in progress. The quality o f the data is a concern, stemming partly f rom rapid turnover in staff in the Statistics Department. The annual Household Surveys have shown l i t t le movement in poverty since the Rose Revolution, i.e. in the 30-31 percent range. At the same time, as a cross- check, IDA and the Ministry o f Labor and Social Protection conducted a Living Standards Measurement Survey (LSMS) in Fal l 2007, and a preliminary analysis o f the results suggests a somewhat lower level o f poverty. A full Poverty Assessment in early FY09 will discuss the differences and suggest strategic pol icy and investment options for poverty reduction efforts going forward. However, some observations can be made at this time. The rapid increase in social spending, including the introduction o f the targeted social assistance program in 2006, has likely improved the situation o f the extreme poor. Additionally, poverty appears to be more concentrated in rural areas and secondary cities.
12. Although a sustained trend toward lower poverty has not yet been established, important non-income dimensions o f poverty have improved, including significantly improved access for the poor to electricity, natural gas, safe water, health services, and higher education (see Annex 2 for Progress against the MDGs). Between 2003 and 2006, the share o f poor households with access to a 24 hour supply o f electricity increased from 19 percent to 66 percent. Over the same period, the share o f poor households with access to gas supply increased from 12 percent to 26
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percent., Although food and energy price increases over the past few years have had a negative impact on the poor, to help offset this the government has introduced a targeted Social Assistance Program, a supplemental benefit package o f medical services for the poor, with approximately 650,000 people or 15 percent o f the population covered by the program in 2007, and increased pensions. Finally, the introduction o f a transparent university admission examination in 2006 resulted in more students from outside the capital ci ty o f Tbilisi entering the higher education system. Looking to the future, the Georgian economy should continue to expand private sector employment and reduce poverty over time (see Annex 3 for the Government’s five year program)
I1 The World Bank Group Country Partnership Strategy
A. Progress and Adjustments to the Results Matrix
13, The first two and a hal f years o f the CPS period have been characterized by rapid reform. Most o f the CPS goals are on schedule or have been achieved earlier than anticipated. Likewise, new lending has been provided in the areas planned, in some cases in larger amounts than originally anticipated, because improvements in Georgia’s CPIA and portfolio ratings increased i t s performance -based IDA allocation. Similarly, IFC’s program has expanded rapidly in response to Georgia’s strengthening private sector environment. In those cases where Georgia’s reform strategy has changed significantly, CPS results indicators have been adjusted accordingly (changes are bolded in Annex 1 : Results Matrix).
Pillar 1: Enabling Income and Employment Generating Growth Economic growth has been remarkably strong, driven by improvements in the business climate and infrastructure. While new jobs have been created, net employment has been stable because of parallel labor shedding in the public sector and rural growth has been disappointing, given the numbers ofpoor living there.
14. Progress on reducing corruption, a central element o f the CPS and the Government’s program, has been strong and measurable. Supported by the PRSO series of policy-based credits, the Government has developed an anti-corruption action plan with annual implementation reports. Key achievements include (i) reorganizing and re-staffing the traffic police, (ii) reducing processing steps and time in customs and licensing, (iii) introducing impartial university entrance exams, and (iv) combining tax, customs and financial police into a single Revenue Services Department in the Ministry o f Finance. Various indicators (BEEPS, WE31 Governance Index, Doing Business) show continued improvement.
15. Georgia has also progressed in removing administrative barriers to private sector development. The PRSO program has supported the Government in streamlining inspection and licensing processes, as wel l as customs procedures. The banking system has also been strengthened through direct IFC investment. IFC has also provided advisory services on streamlining inspections. A dramatic improvement in the business environment has been indicated in the Doing Business report, corroborated by IFC’s Business Environment in Georgia 2006 Report, based on a survey o f 2,000 SMEs, though the survey found that more work i s needed on taxes, customs, and infrastructure. Since the CPS, the I F C has launched an advisory program to strengthen corporate governance and streamline private sector regulations, including efforts to introduce Regulatory Impact Assessments (RIA) for current and future legislation.
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16. Georgia has made remarkable progress on energy and transport infrastructure. Under the PRSO Program, the Government prepared a medium term energy strategy, and has updated it regularly. With the completion o f the 2007 privatization program in power generation and distribution, the private sector has become the main operator, with the state shifting towards a regulatory function. System-wide outages have been slashed from 20 hours to close to 0, and 24/7 power i s now provided to nearly all paying customers. As the Government has met i t s energy outcome indicators, these were expanded to include improvements in energy regulations as a step towards raising service quality, and increasing hydro-power potential. The Bank i s also helping Georgia diversify i t s energy supply through funding pre-feasibility studies on the Khudoni Hydropower plant. Through i t s transport projects, the Bank i s helping to improve Georgia’s secondary roads and upgrade i t s East-West highway. In parallel, IFC i s financing construction o f the new terminal at Tbilisi Airport.
17. M o r e modest progress i s being achieved in improving rural services and growth. Agriculture, which employs about half the workforce, has not shown much growth over the past few years. Agricultural productivity has suffered from natural disasters (floods and droughts), the neglect o f basic infrastructure, as well as from absorbing surplus labor resulting from the sharp contraction o f output following the break up o f the former Soviet Union. In this context, Bank financed projects are focused on rehabilitating irrigation, introducing new technologies and developing supply chains in particular crops. Since the CPS, the Government has revised i ts approach to water management by establishing four state-owned companies to oversee the irrigation network in conjunction with water users associations (AAs), and the Bank has adjusted i t s support to provide capacity building for the irrigation companies and strengthen work with A A s . A l ine o f credit with commercial banks i s beginning to disburse, with a robust pipeline o f investments approved or under consideration, and a micro-finance scheme i s about to be launched. Finally, the Bank responded to an emergency request for an Avian Influenza Control Project, which i s now being adapted to address the added threat o f swine fever.
18. Financial sector. The financial sector grew threefold from 2005-2007. IFC has supported four banks with financing (TBC, Procredit, Bank o f Georgia, and Bank Republic) and growth in financial leasing and mortgage financing. International banks including SociCtC GCnCrale, HSBC, two Kazakh banks and KOR bank (UAE) have also entered the market. The Bank and the IMF jointly fielded a Financial Sector Assessment (FSAP) in 2006 which identified policy options to strengthen bank supervision and improve payments systems. In March 2008 Parliament approved a new set o f financial laws (see para. 9), and the Bank has also launched a TA program with NBG to upgrade payment systems.
19. Finally, progress in ensuring that forests and other natural resources are protected and contribute to growth has been weaker than anticipated. The Protected Areas Development Project (GEF) has been largely successful in strengthening Georgia’s capacity for managing a national network o f protected areas and the functioning o f several newly established protected areas. The Integrated Coastal Management Project made some progress towards improved environmental planning along the Black Sea but closed without ensuring a strong legal framework for coordination and institutional sustainability. The Forests Development Project has stalled due to both technical and policy concerns related to the development o f forest inventories. Disbursements have been suspended until an acceptable approach can be reached.
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Pillar 2: Human Development and Social Protection Georgia has made important efforts to improve social services in terms of both funding and quality. I n education, curriculum has been reformed, facilities rehabilitated, and transparent testing introduced. In social assistance, the Government has introduced a targeted program aimed at assisting the extreme poor. Health reform is ongoing, with a move towards increasing the role of the private sector, combined with health insurance for the poorest.
20. There have been important improvements in the management of the education system. Through the PRSO Program and the Education APL I and APL I4 the Bank has provided intensive pol icy and investment support for a major reform program. K e y actions have included raising teacher salaries, establishing a transparent funding mechanism, improving the curriculum and teacher’s skills, introducing a transparent University entrance exam to reduce corruption and extensive rehabilitation o f facilities. The Ministry o f Education was also the first to establish a baseline survey dealing with anti-corruption issues. Given Georgia’s faster than anticipated education reforms, it has met most o f the CPS education indicators at mid-term. IDA assisted the Government in preparing the Education Strategy for 2007-20 1 1, on which basis Georgia was admitted into the Education Fast Track Initiative (FTI) in July 2007. IDA also mobilized funding and helped to launch an International School o f Economics (ISET) which offers a graduate level program based on full international standards and teaching. During the second hal f o f the CPS, the Bank will help the Government with the full rol l out o f the curriculum reform and track actual education assessment progress through international benchmarks (PIRLS and TIMMS).
21, With support f rom the PRSO program, the Government launched the Medical Assistance Program for the Poor (MAP) in June 2006, which provides health insurance coverage to about 700,000 o f the poorest. Init ial results indicate increased utilization o f health services by the poor. The Government increased the budget for the M A P program by almost 80 percent in 2008 in order to expand service coverage. In parallel, the Primary Healthcare Project financed major training activities and rehabilitation o f some primary healthcare (PHC) facilities, and these have helped increase chi ld immunizations and the number o f pre-natal visits for pregnant women. Since the CPS was wr i t ten the Government articulated a new pol icy o f moving rapidly towards a privately operated health system. The Bank financed health project i s being adjusted to support the Government’s reform needs including strengthening the information system. The Bank i s also providing technical assistance in preparing a regulatory framework to monitor service provision by the private sector, and conducting an impact evaluation o f the M A P program. I F C may consider investing in emerging private or public-private health facilities.
Reform of the health sector i s ongoing:
22. Pensions and the social security system have improved. Under the PRSO Program, the Government eliminated pension and wage arrears, increased pensions by 50 percent in real terms and introduced a targeted social assistance benefit system for the poorest starting in September 2006. The latter i s based on a new targeting methodology and electronic database covering about 400,000 households. Of these, approximately 120,000 o f the poorest households (representing 12 percent o f a l l households) now receive targeted social assistance.
23. The Bank has also helped Georgia build a robust approach to decentralized infrastructure service provision. The Municipal Development Project 11 and the Georgia Social Investment Fund 11 have supported local capacity building and municipal and local infrastructure investments. These projects closed on December 3 1 2007, but the Government
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has requested IDA to prepare a repeater project for delivery in early FY09. The Bank i s also continuing to supervise part o f the M C C program in Georgia, related to municipal infrastructure. IDA will also support planning activities for the Tbilisi metropolitan areas through a grant from the Cities Alliance Program. In the second hal f o f the CPS the Bank will assist in building capacity in the newly established local self governments
Pillar 3: Improving Efficiency of Public Services Many public institutions have been streamlined which has increased eficiency and reduced corruption. Budgetary processes have been improved and fund flows are more transparent. However, regulatory and fiduciary pameworks remain weak and there is a perception that policy making is not inclusive and the rule of law has not always been impartially applied.
24. Addressing governance and public sector management issues are key features of the CPS: Under the PRSO program, the Government established an anti-corruption strategy which has been followed up with annual implementation plans. The Government has taken important steps to reorganize key c iv i l service areas including the Police, the Chamber o f Control, the Ministry o f Justice, and Tax and Customs administrations. Under the PRSO, the Government also worked to strengthen the budget process, based on a Medium Term Expenditure Framework (MTEF). Another achievement was strengthening the Treasury with the introduction o f a Treasury Single Account (TSA) for a l l government agencies.
25. Some progress has been achieved on public financial management and procurement, though a large agenda remains. The Chamber o f Control has been restructured and re-staffed and a draft l aw elevating i t s mandate and responsibilities has been submitted to Parliament. The Bank i s working with the Chamber o f Control, Parliament and Government so that the enacted law i s broadly in l ine with international standards (INTOSAI). The Bank and the EU are joint ly preparing a Public Expenditure and Financial Management Assessment (PEFA) in 2008 that wil l give a snapshot o f the status o f Public Financial Management (PFM) system in Georgia, highlight areas needing improvement, and provide a base-line for monitoring progress in P F M going forward. Under the PRSO Program, a new State Procurement Law became effective in January 2006. It created the State Procurement Agency (SPA) and established country-wide state procurement rules. Despite these achievements, there i s not yet an effective system for public procurement. The Bank i s currently in dialogue with Government on a Country Procurement Assessment (CPA) which will recommend actions for strengthening o f public procurement.
26. Georgia i s modernizing its judiciary, but mostly outside of the CPS framework. The Judicial Project closed in FY07 and the Government i s moving forward on its own and with other donors such as UNDP, EU and USAID. Progress supported by the project included rehabilitating 15 courthouses, increasing judicial training and establishing an institution for raising public awareness. At the same time, improving court efficiency through an electronic case management system is being pursued outside o f the project and has therefore been dropped from the results matrix. I t should be noted, however, that considerable progress is s t i l l needed to enhance public confidence in the objectivity and independence o f the judiciary.
27. Inter-Governmental fiscal relations are being improved. Under the PRSO program, Georgia enacted a new Law on self-Government Budget in 2006 which established clear procedures for inter-government finance. The authorities also consolidated over 1,000 local self government units into 69 units at the rayon and special status city levels and held local elections
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in 2006. The MDDPII Project provided technical assistance for drafting the law on local budgets, including a new equalization system based on an objective formula for transferring funds to the new local entities. During the second half o f the CPS, the Bank will assist on the implementation o f this structure and the related inter-governmental finance.
B. The Bank’s Lending and Analytic Work Program
28. Lending has been higher than the indicative program set out in the FY06-09 CPS, though focused on the same activities. The initial CPS estimated an IDA lending envelope o f $143 million for the four year period FY06-09, focused on policy based support, infrastructure and the transit corridor, the education sector, and public sector management. For the f i rst three years, the Bank supported all expected activities, and also added an Avian Influenza Control Project, for a total larger amount o f $166 million (see Annex B3). This larger lending level was possible due to the increase in Georgia’s policy and institutional performance during the first half o f the CPS, and thus an increase in i t s IDA allocation.
29. In line with the CPS, IDA also delivered an extensive analytic work program. Much o f this analytic work was provided through PHRD grant support for the PRSO program. Two other cornerstones o f IDA advisory support have been the Programmatic Public Expenditure work and the Programmatic Poverty Assessment (PA). At the same time, there has been a deterioration in poverty statistics, partly due to high staff turnover, and the Bank wi l l prepare a full Poverty Report in FY08 to consider ways o f further strengthening them. In FY08, both wi l l be supplemented by formal AAA reports, including a PEFA-Public Financial Management Assessment, undertaken jointly with the European Union. Two other core diagnostics will round out the program in FY08/FY09 - a Country Economic Memorandum (CEM) which wi l l look at the factors influencing growth and a Country Procurement Assessment (CPA). These core efforts were complemented by sector studies in (i) finance - the Financial Sector Assessment Program (’SAP) - joint ly by the Bank and IMF and (ii) an Education Policy Note leading to Georgia’s admission into the Education Fast Track Initiative (FTA), and (iii) an Accounting and Auditing ROSC. Finally, IDA supports an active Youth Voices program.
30. The quality of the Bank’s portfolio i s good, though there are some issues. For the portfolio as a whole, disbursements have been around 30 percent per year on investment projects, well above the Bank average. Out o f sixteen ongoing investment projects all are satisfactory except one - the Forest Management Project. Disbursements on this project have been suspended until acceptable approaches to both policy and technical issues related to forest inventories can be reached. About a third o f IDA’S projects in Georgia will close over the coming year. IEG i s preparing a Country Assistance Evaluation which will review lessons learned over the past 15 years and help shape the next CPS.
IFC Programs
31. IFC’s portfolio in Georgia as o f January 2008 stands at about $93 million with seven clients and i s performing well. During FY06 and FY07, IFC extended $38 million, including investments in airport terminals in Tbilisi and Batumi, and additional support to TBC Bank. In FY08-09, IFC has further invested in financial markets (Bank Republic, TBC Bank) and anticipates further investments in retail and real estate development. In addition, IFC hosted a large investment conference in New York in March 2006 and i s currently implementing two advisory projects: (1) the Georgia Business Enabling Environment Project, which conducted an
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SME survey and provided advice on licenses, permits, and inspections, and (2) the Georgia Corporate Governance Project, which helped to establish rules related to conflicts o f interest and assists companies in improving their corporate governance practices. Through the Doing Business report, the Georgia Business Enabling Environment Project, and the Georgia Corporate Governance Project, I F C i s actively engaged in improving the environment for private business in Georgia.
D. Partnerships
32. Donor support for Georgia following the Rose Revolution has been substantial. The June 2004 donors’ conference sponsored by the EU and the Bank generated $1.1 bi l l ion in pledges for 2004-2006. This goal was achieved and exceeded, with donors actually committing about $1.6 bi l l ion over this period. IDA allocations were considerably higher than projected in the CPS because o f Georgia’s improved performance. U S assistance was also higher than projected because o f the M C C Compact, and EU assistance climbed due to Georgia’s participation in the EU Neighborhood Program (ENP). Bilateral assistance from Germany, Japan and the Netherlands were also al l higher than pledged, and Georgia joined ADB in February 2007.
33. The Bank is working closely on coordination with external partners. Several projects delivered in the CPS period have direct or parallel cofinancing. The Public Sector Financial Management Reform Support Project i s being supported through a pooled funding arrangement from the Bank, DFID, the Netherlands and SIDA. The PRSOprogram was cofinanced by the Netherlands, and the EU has provided parallel financing. The Education Project has a strong cofinancing element f rom Japan through the PHRD program. The Rural Development Project i s cofinanced with IFAD and Japan though the PHRD program. IFC’s advisory services on the business environment and corporate governance are supported by Canada and British Petroleum (BP) and partners under the Regional Development Initiative.
34. With regard to analytic activities, the Bank and the IMF joint ly prepared the Financial Sector Assessment Report (FSAP) in FY06, and the Bank i s working closely with the EU on a joint Public Expenditure and Financial Management report scheduled to be completed in FY08. Finally, the Bank and the US Millennium Challenge Corporation (MCC) have established an innovative partnership, whereby the Bank provides supervisory services on MCC’s program with the Municipal Development Fund.
111. The CPS Program Going Forward
35. The CPS Program i s on track and Georgia’s strong performance has meant that more I D A funds are available than anticipated at the start o f the CPS. Georgia has also become eligible to begin IBRD borrowing in FY09. Priorities for the remainder o f this CPS period would be (i) to initiate a next series o f development pol icy support credits starting in FY09, and (ii) deepen infrastructure support, both in the East-West transit corridor and for municipal development, with priority to secondary cities and towns (see Annex Table B3). Other infrastructure support could also be considered. The Bank’s ongoing programs in the social sectors and in rural development would be candidates for further support during the next CPS period. The next CPS would also lay out a more explicit framework for full transitioning from
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IDA to IBRD. IBRD lending levels would depend on continuing good macro performance, overall debt levels, and reform momentum.
36. IFC anticipates steady growth and diversification of its investment portfolio. A particular focus will be on the development o f new financial products, including mortgage and leasing. Other sectors where IFC i s actively pursuing investment opportunities include retail services, real estate development, transport and logistics, energy, health care, tourism, and agribusiness. Sub-national finance may be another area for potential investment.
IV. Risks
37. Macroeconomic risks remain, but are manageable. Growth for the past few years has been in the 9-12 percent range, inflation has until very recently remained in single digits, and tax revenues are up dramatically. In the latest IMF/Bank debt sustainability analysis the debt risk has declined to low. Standard and Poors has given Georgia a “B+” rating and Fitch has recently extended Georgia a “BB-”rating. At the same time, the budget deficit widened and inflation has crept up to 11 percent at the end o f 2007. Strong capital inflows have fueled a large external current account deficit and this points to the need to develop contingency plans in the event o f any shortfall in inflows. The Georgian authorities have indicated that they are prepared to tighten fiscal and monetary policies. They have also just successfully issued a $500 mi l l ion Eurobond, which (together with privatization proceeds) will be set aside for stabilizatiordfuture generations. This i s indicative o f growing investor confidence in Georgia. The CPS envisions mitigating macroeconomic risks by maintaining a strong AAA program (built around the C E M in FY08/09) and a new series o f policy support credits in FY09 and beyond.
38. Reform momentum remains strong, though the political situation has become more complicated. The Government remains committed to reduce corruption, strengthen infrastructure, diversify energy sources and build the private sector environment. At the same time, it will be important for the Government to pursue these efforts with greater involvement o f a wider range o f participants, particularly given the strengthening o f opposition forces during the recent elections. The Government also faces the challenge o f moving from one-off reforms to more systemic and institutional reforms, including strengthening the Chamber o f Control and the State Procurement Agency. A s above, a strong AAA and policy support program will help backstop reform momentum.
39. The geopolitical situation remains unresolved. Relations with Russia remain difficult, with continued trade restrictions and tensions over the future o f the Abkhazia and South Ossetia conflicts. If these are resolved, a larger effort would be needed to develop these regions. On the other hand, further deterioration could dampen Georgia’s growth and ability to attract foreign investment.
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Annex: 2 - Progress in Achieving the MDGs
Georgia Adjusted Goal
Goal 1. Eradicate extreme poverty
Goal 2. Ensure coherence of Georgian educational systems with educational systems o f developed countries through improved quality and institutional set-up
Goal 3. Promote gender equality and empower women
Goal 4. Reduce child mortality
Goal 5. Improve maternal health
Goal 6. Combat HIV/AIDS, malaria and other diseases
Goal 7. Ensure environmental sustainability
Goal 8. Develop a global partnership for development
Status in the CPS
Although the economy has been growing steadily, growth has been too narrow-based to allow for poverty reduction, while the government’s failure to meet social transfer obligations in the past exacerbated poverty. Enrollment rates remain high. Significant reforms are being undertaken in the education sector.
Gender equality exists in school enrollment, literacy, and share o f women in wage employment.
The under-five mortality rate in Georgia was better than the average for ECA. However, in 2004, the indicator worsened.
Available data suggest that the maternal mortality rate (MMR) i s on a decreasing trend.
Decreasing trends of TB prevalence and malaria have been observed. Georgia st i l l has low HIV/AIDS prevalence, although incidence has been rising, mainly due to drug use. Efforts to integrate sustainable natural resource use policies have had limited success to date. 95% o f urban population has access to improved water, but only 35% of rural population has this. Strong support from the international community; competitive banking system; relatively open trade regime; improved debt position. Communications limited in rural areas.
Current Status and likelihood of Meeting 2015 goal
Potentially. Despite higher economic growth and social spending poverty remains high. However, the deep reforms enacted are expected to create more employment opportunities and bring down poverty levels over time.
Likely. Georgia has instituted deep reforms in the education sector and its strategy has been accepted into the Education Fast Track Initiative (EFI). With continued momentum, Georgia i s likely to meet this goal. Likely. Several aspects have already been achieved. However, female wages are significantly lower than male. The legal framework in gender-related issues needs to be strengthened. Potentially. The under-five mortality rate dropped from 29.4 in 2003 to 19.4 in 2005 per 1,000 live births. Further gains possible due to strengthening primary care access and benefits.
Potentially. Maternal mortality dropped from 49.2 in 2000 to 2 1.3 in 2005 (per 100,000 live births). Further gains possible due to strengthening primary care access and benefits. Likely. HIV/AIDS rate kept at 0.15% in 2005. Georgia has improved efforts to control the spread of HIV, TB, and malaria. If planned measures are implemented, it i s likely that this goal will be met. Potentially. Water supply and wastewater rehabilitation i s ongoing supported by various donors. Several national parks established but wetlands under risk. Forest plans and policies under review.
Likely. Georgia has adopted one o f the most open business and trade regimes and has attracted significant foreign investment in 2006/ 07. Debt risk has declined. In 2006, the MCC extended a large support compact, The EU signed an ENP Action Plan with Georgia, and Georgia joined the
28
Annex: 3 - The Government’s Five Year Strategy
Following Presidential elections in January 2008 and the formation o f a new Cabinet, the Government issued a five-year program o f key priorities for 2008-2012 - United Georgia without Poverty - which was approved by Parliament on January 3 1 2008. The below provides a short bulleted summary:
National Security
Territorial and c iv i l reintegration;
Georgia’s NATO membership -the country will accomplish al l the stages for N A T O membership and meet al l the required targets in the next five years;
Deepening EU integration by enhancing Four Freedoms - securing free movement o f goods, services; persons (first and foremost for students, entrepreneurs and scientists) and free movement o f capital; Normalization of relations with Russia - relations with Russia will be based on mutual understanding and mutual respect. Development o f economic t ies without any artificial obstacles.
Economic, Fiscal and Monetary Policy
b
b
Economic pol icy o f recent years will be maintained in the next five years; Average economic growth rate will be 8% annually in the next f ive years; Share o f state budgetary expenditure will be decreased from 29% to 22% o f GDP; Single digit inflation - as a result o f a strict monetary policy, which will be carried out at the initial stage o f implementation o f this program, as wel l as due to budgetary surplus, average inflation rate will be 7% in the next five years; Foreign direct investments will increase and annual FDI will amount to 10% o f GDP, which will amount to U S D 10 bi l l ion in the next five years; Budget surplus will amount to at least 0.5% o f GDP; Income tax will go down from the current 25% to 15%; International financial center will emerge in Georgia as a result o f planned liberal financial system, which will attract at least USD 12 bi l l ion and create at least 10,000 new jobs; Fund for Future Generations - 25% o f budget surplus and 75% o f income received from privatization will be accumulated in this fund. Rehabilitation costs following restoration o f Georgia’s territorial integrity will be covered from this fund, P M Gurgenidze said. Two other possible cases in which the fund can be used are, he said, large-scale natural disaster or war; the fund i s expected to raise at least GEL 3 billion; Fund for Stable Development - 30% o f budget surplus and 25% o f income received from privatization wil l go to this fund; GEL 2 bi l l ion is expected to be accumulated in the fund, which is designed to deal with unexpected economic challenges; Share o f exports will amount to 40% o f GDP; Flexible and effective privatization - only a small number o f facilities will remain under state ownership and management o f al l state-owned facilities will be handed over to private operator companies; Guarantees of private property will be secured through the constitution and better judicial practice;
29
Georgia’s sovereign credit rating will increase by at least three points in the next five years;
Population’s Welfare
One-third of state budget will be spent on social programs - this rate will be maintained for the next five years; practice o f pointless social allowances will be changed with targeted purpose-oriented allowances; Economic growth will boost employment - USD 10 bi l l ion foreign direct investment i s needed for the creation o f 200,000 new jobs over the next five years; Poverty reduction - number of social program beneficiaries will be halved in the next five years as a resul t o f poverty reduction; USD 100 will be the minimum monthly pension; Population will be increased by 150,000 as a result o f returning emigrants; State-funded health insurance will be available for 1.2 million people, including socially vulnerable, teachers, military and law enforcement personnel and employees o f state agencies; Socially vulnerable fami l ies will receive GEL 1,000 for each newborn child;
Logistics, Transport and Infrastructure Free economic zone in Poti - the project will result in GEL 1.5 bi l l ion investment and create about 20,000 new jobs; Additional 30% of road infrastructure will be rehabilitated; Georgia will have at least three international airports; Share o f hydro-power generation will increase to 90% and three-fold increase in electricity exports;
Agriculture and Natural Resources
Share o f agricultural products will increase to 25% o f overall exports; 200 new agriculture processing factories will be set up; Natural resources will be managed by private sector;
Education and Sports
City o f Knowledge - a large-scale complex o f campuses and educational centers in Tbilisi; All schools will be equipped with computers and Internet access; 50 new sport complexes will be set up and 3,000 sportsmen will receive state scholarships;
Defense and L a w Enforcement
Full transformation into contract-based military service; Strengthening o f protection o f property rights by the police; enhancement o f the crisis management system; increase o f public confidence in police.
30
BASIC CAS TABLES
31
Georgia at a glance 4/25/08
K e y Deve lopmen t I n d i c a t o r s
(2007)
Population. mid-year (millions) Surface area (thousand sq. km) Popuiation growth (%) Urban population (% of total population)
GNI (Atlas method, US$ billions) GNI per capita (Atlas method, US$) GNI per capita (PPP. international $)
GDP growth (%) GDP per capita growth (56)
(most recent estimate, 2000-2007)
Poverty headcount ratio at $1 a day (PPP, %) Poverty headcount ratio at $2 a day (PPP, %) Life expectancy at birth (years) Infant mortality (per 1,000 live births) Child malnutrition (% of children under 5)
Adult literacy, male (% of ages 15 and older) Adult literacy, female (% of ages 15 and older) Gross primary enrollment, male (% of age group) Gross primary enrollment, female (U of age group)
Access to an improved water sourcs (% of population) Access to improved sanitation facilities (Oh of population)
Georgia
4.4 70
-0.9 53
8.7 1,990 3,690
12.4 13.4
7 25 71 39
95 95
76 83
Europe & Central
Asia
460 24,114
0.0 64
2,206 4,796 9,662
8.8 6 8
1 10 69 28
5
99 96
103 100
92 85
Lower middle
income
2,276 28,549
0.9 47
4,635 2,037 7,020
8.8 7.9
71 31 13
93 85
117 114
81 55
N e t A id Flows
(US$ mllhons) Net ODA and official aid Top 3 donors On 2005)
United States Germany France
Aid (% of GNI) Aid per capita (US$)
Long-Term Economic T r e n d s
Consumer prices (annual % change) GDP implicit deflator (annual % change)
Exchange rate (annual average, local per US$) Terms of trade index (2000 100)
Population, mid-year (millions) GDP (US5 millions)
Agriculture Industry
Services
Household final consumption expenditure General gov't final consumption expenditure Gross capital formation
Exports of goods and sewices Imports of goods and services Gross savings
Manufacturing
1980
1 0
5 1
24 3 35 6 27 9 40 1
55 8 13 0 29 1
1990 2000
0 169
72 75 15 19 0 1
0 0 5 3 0 36
3.3 4.0 -67.4 4.7
0.0 2.0 100
5 5 4 7 7,738 3,057
(% of GDP) 31 5 22 0 33 5 22 4 24 2 9 1 35 0 55 6
648 89 8 10 2 9 2 30 7 26 6
39 9 20 0 45 7 35 6
9 2
2007 a
310
73 51 18
4 8 69
11 0 11 5
1 7 173
4 4 10,098
10 7 21 4 8 4
68 0
79 7 14 4 28 6
42 4 65 1 10 7
Age distribution, 2006
Male Female
70.74
50.64
50-54
40-44
30-34
20-24
10-14
0-4 - 15 10 5 0 5 1C
percent
Jnder-5 mortality rate (per 1,000)
6 0 .
rGeorgia -Europe 8 Central Asia
I IGrowth of GDP and GDP per capita (%)
20 10 0
-10
-20 -30
-40
-50
-GDP - GDP per capita I
1980-90 1990-2000 2000-07 (average annual growth %)
0.7 -1.5 -1.0 6.7 -7.1 8 3
0 9 I 1 4 12 1 10 0
23 2 9 0 31 1 12 3 23 6 9 7
8 8 21 5 9 3 20 9
Note. Figures in italics are for years other than those specified. 2007 data are preliminary Group data are through 2006. .. indicates data are not available. a. Aid data are for 2005.
Development Economics, Development Data Group (DECDG).
32
Georaia
Balance of Payments and Trade
(US$ millions) Total merchandise exports (fob) Total merchandise imports (cio Net trade in goods and services
Current account balance as a % of GDP
Workers' remittances and compensation of employees (receipts)
Reserves, including gold
Central Government Finance
(% of GDP) Current revenue (including grants)
Current expenditure
Overall surplusldeficit
Highest marginal tax rate (%)
Tax revenue
Individual Corporate
External Debt and Resource Flows
(US$ millions) Total debt outstanding and disbursed Total debt service Debt relief (HiPC, MDRI)
Total debt (56 of GDP) Total debt service (% of exports)
Foreign direct investment (net inflows) Portfolio equity (net inflows)
2000
459 971
-52 1
-269 -8.8
274
116
15.5 14.1 18.1
-3.5
1,638 118 -
53.6 12.5
131 0
2007
1,782 5,053
-2,294
-1,815 -18.0
346
1,451
28.9 25.3 26.8
4 . 3
12 20
1,965 251
-
19.5 6.6
1,190 150
Composition of total external debt, 2007
Short-term. 111
latemi, 129 L i M F 197
Private Sector Development
Time required to start a business (days) Cost to start a business (46 of GNI per capita) Time required to register property (days)
Ranked as a major constraint to business (% of managers Surveyed who agreed)
Economic and regulatory policy uncertainty Antiwmpetitive or informal practices
Stock market capitalization (%of GDP) Bank capital to asset ratio (%)
2000 2007
- 11 - 9.5 - 5
.. 44.7
.. 38.2
0.8 5.5 30.5 18.8
/Governance indicators, 2000 and 2006
Voice End Eccountability
Political stability
REgUlEtOV qUallty
Rule of law
Control of corruption
0 25 50 75 1 w
82006 Country's percentile rank (0-100) 02000 higher vdws mp'v tetter rdmgt
Soume Kaufmann-Kraay-Masbun, World Bank
Technology and Infrastructure 2000 2005
Paved roads (% of total) Fixed line and mobile phone
High technology exports subscribers (per 1,000 people)
(% of manufactured exports)
93.4 39.4
149 337
13.2 22.6
Environment
Agricultural land (% of land area) 43 43 Forest area (% of land area) 397 397 Nationally protected areas (% of land area) 2 3
Freshwater resources per capita (cu meters) 12,985 Freshwater withdrawal (% of internal resources)
CO2 emissions per capita (mt) 096 0 8 2
GDP per unit of energy use
6 2
(2000 PPP $ per kg of oil equivalent) 3 3 4 3
613 626 Energy use per capita (kg of oil equivalent)
(US$ millions)
IBRD Total debt outstanding and disbursed Disbursements Principal repayments Interest payments
- 0 - 0 - 0 - 0
IDA Total debt outstanding and disbursed 347 784 Disbursements 18 76 Total debt service 3 10
IFC (fiscal year) Total disbursed and outstanding porffolio 20 38
of which IFC own account 20 38 Disbursements for IFC own account 16 12 Portfolio sales, prepayments and
repayments for IFC own account 0 6
MlGA Gross exposure 2 0 New guarantees 0 0
Note Figures in italics are for years other than those specified 2007 data are preliminary indicates data are not available -indicates ObSeNatiOn is not applicable
Development Economics, Development Data Group (DECDG)
4/25/08
33
Millennium Development Goals Georgia
350 -
With selected targets to achieve between 7990 and 2075 (estimate closest to date shorn, +/- 2 yearn)
Goal I: halve the rates for S I a day poverty and malnutrition 1990 1995 2000 2005 6.5 Poverty headcount ratio at $1 a day(PPP, % of population)
Poverty headwunt ratio at national poverty line (% of population) Share of income or consumption to the poorest quritile (%) Prevalence of malnutrition (% of children under 5)
52.1 54 5 5.6
3.1
Goal 2: ensure that children are able to complete prlmaryschoollng Primary school enrollment (net, %) 97 100 93 Primary completion rate (% of relevant age group) 101 87 Secondary school enrollment (gross. %) 95 79 83 Youth literacy rate (%of people ages 1524) 100 100
Goal 3: eliminate gender dlspadty In education and empower women Ratio of girls to boys in primary and secondaryeducation (%) 98 99 99 Women employed In the nonagricultural sector (%of nonagricultural employment) 45 45 41 47 Proportion of seats hald by women in national parliament (%) 7 7 9
Goal 4: reduce under5 mortality by two-thirds Under-5 mortality rate (per 1,000) 47 45 45 32 Infant mortality rate (per 1,000 live births) 43 41 41 28 Measles immunization (proportion of one-year olds immunized. %) 16 61 73 86
Goal 5: reduce maternal mortality by three-fourths Maternal mortality ratio (modeled estimate, per 100,000 live births) Births attended by skilled health staff (% of total)
32 30 96
Goal 6: halt and begin to reverse the spread of HNlAlDS and other major diseases Prevalence of HIV (% of population ages 15-49) Contraceptke prevalence (% of women ages 1549)
Tuberclriosls casesdetected under DOTS (%) 18 34 79
0.2
Incidence of tuberculosis (per 100,WO people) 38 82 41
Goal 7: halve the proportion of people without sustainable access to basic needs Access to an Improved water source (% of population) Access to improved sanitation facilities (% of population) Forest area (%of total land area) 39.7 39.7 Nationally proteded areas (% of total land area) 2.3 C02 emissions (metric tons per capita) 3.2 0.5 1 .o 0.8
76 83
GDP per unit of energy use (constant 2WO PPP $ per kg of oil equivalent) 1.2 2.3 3.3 4.3
Goal 8: develop aglobal partnership for devdopment Fixed line and mobile phone subsmbers (per 1 ,OW people) 99 110 149 337 . . Internet users (per 1,000 people) Personal computers (per 1,000 people) Youth unemployment (% of total labor force ages 1524)
iducatlon Indicators (K)
75
25 i 0 4 , , , ,
2WO m 2W5
+Primary net enrollment ratio
+Ratio of gids to boys in primsry 8 secondary education
Measles immunization (% of 1-year olds)
l B S 0 1BS5 2WO 2W5
OGeorgia 0 Europe 8 Central Asia
0 0 5 39 24 42
21.1 27.9
Note: Figures in Italics are for years other thm those specified. .. indicates dataare not available
Development Economics. Development Data Group (DECDG).
4/25/08
34
CAS Annex B2 - Georgia Selected Indicators* of Bank Portfolio Performance and Management
As Of Date 03/19/2008
Indicator 2005 2006 2007 2008 Portfolio Assessment Number of Projects Under Implementation a 18 19 19 16 Average Implementation Period (years) 4.9 5.0 4.4 4.8 Percent of Problem Projects by Number 0.0 10.5 5.3 6.3
Percent of Projects at Risk by Number 0.0 10.5 5.3 6.3
Disbursement Ratio (%) e 20.1 29.6 33.5 32.7 Portfolio Management CPPR during the year (yeslno) Supervision Resources (total US$) Average Supervision (US$/project)
Percent of Problem Projects by Amount at 0.0 18.4 4.9 5.7
Percent of Projects at Risk by Amount a, 0.0 18.4 4.9 5.7
Memorandum Item Since FY 80 Last Five FYs
Proj Eva1 by OED by Amt (US$ millions) 534.0 116.9 % of OED Projects Rated U or HU by Number 22.7 28.6 % of OED Projects Rated U or HU by Amt 36.9 15.4
Proj Eva1 by OED by Number 22 7
a. As shown in the Annual Report on Portfolio Performance (except for current FY). b. Average age of projects in the Bank's country portfolio. c. Percent of projects rated U or HU on development objectives (DO) and/or implementation progress (IP). d. As defined under the Portfolio Improvement Program. e. Ratio of disbursements during the year to the undisbursed balance of the Bank's portfolio at the
beginning of the year: Investment projects only. * All indicators are for projects active in the Portfolio, with the exception of Disbursement Ratio,
which includes all active projects as well as projects which exited during the fiscal year.
35
CAS Annex B3 - IBRDllDA Program Summary Georgia As Of Date 03/19/2008
Proposed IBRDADA Base-Case Lending Program a
Fiscal pmj,D year
Strategic Rewards Implementation b US$(M) b (HIMIL) Risks (HIMIL)
2006-07 PRSO I PRSO II Public Sector Reform Support Infrastructure Pre-Investment Facility Highway Education APL II
PRSO 111
Avian Influenza Control
Result
2008 Highways II PRSO 4
Result
20 20
3 5 19
15
20 7
109
35.0 22.7 57.7
H H H H H H H M
M M M M M M M M
2009 Highways II Additional H Municipal Infrastructure Development H Other Infrastructure H Development Policy Credit H Result 90
H M H M
M M M M
includes both IDA and IBRD. IDA lending in FYO9 dependent on the Annual Performance Based Allocation Framework. Estimated FYO9 IBRD lending is about $30 million. Additional sub-sovereign lending is possible.
36
Annex B3
Georgia: IFC Investment Operations Program
2005 2006 2007 2008*
Commitments (US$m) Gross Net**
Net Commitments by Sector (%) EQUITY
7.00 35.75 2.48 27.19 7.00 35.75 2.48 27.19
24.48 100 26.43 LOAN 42.86 75.52 73.57 QUASI LOAN Total
57.14 100 100 100 100
Net Commitments by Investment Instrument (%) Equity 24.48 100 26.43 Loan 42.86 75.52 73.57 Quasi loan 57.14 Total 100 100 100 100
As of March 31,2008 ** IFC's Own Account only
37
CAS Annex B4 - Summary of Nonlending Services - Georgia As Of Date 0 3 1 912008
Completion Cost Product FY (US$OOO) Audiencea Objectiveb
Recent completions Health Note Policy Recommendations Note Child Welfare Note Post Conflict Grant TA Financial Sector Note TA Social Capacity and Rural Devlpmt Pension and Social Assistance Rural Infrastructure Study Financial Sector Assessment Program Accounting and Auditing ROSC Education Policy Note
Underway Country Economic Memorandum CPAR
Full Poverty Report Youth Voices Business Environment Health Sector TA Water Resource and Risk Mgmt TA e-govt IDF grant Financial Sect Payment Systems
P E FA-P F MA
Planned Programmatic Poverty Assessment Programmatic PER Kolketi National Park TA
FY 04 FY 04 FY04 FY04 FY05 FY05 FY05 FY06 FY07 FY07 FY 07
FYO8lO9 FY08 FY08 FY08
Annually Annually Annually
FYO8lFYO9 FY08 FY08
Annually Annually
FYO9
50 60 70 155 83 55 100 50 75 50 100
300 100 150 200
25 pa 50 pa 50 pa
50 50 100
125 pa 100 pa
50
a. Government, donor, Bank, public dissemination. b. Knowledge generation, public debate, problem-solving.
38
Georgia - Key Economic Indicators
Actual Estimate Projected Indicator 2004 2005 2006 2007 2008 2009 2010 2011
National accounts (as % o f GDP) Gross domestic product"
Agriculture Industry Services
100 100 18 17 26 27 56 56
Total Consumption 87 84 Gross domestic fixed investment 27 28
Government investment 2 4 Private investment 25 24
~xports (GNFS)~ Imports (GNFS)
Gross domestic savings Gross national savings'
30 34 46 52
13 16 23 23
Memorandum items Gross domestic product 5126 6412 (US$ million at current prices) GNI per capita (US$, Atlas method) 1060 1330
Real annual growth rates ("4, calculated &om 94 prices) Gross domestic product at market prices $9 9,6 Gross Domestic Income 5,9 9,6
Real annual per capita growth rates (%, calculated &om 94 prices) Gross domestic product at market prices Total consumption Private consumption
Balance o f Payments (US% millions) EXPO& (GNFS)~
Merchandise FOB Imports (GNFS)~
Merchandise FOB Resource balance Net current transfers Current account balance
Net private foreign direct investment Long-term loans (net) Official Private
Other capital (net, incl. errors & ommissions)
Change in reservesd
Memorandum items Resource balance (% o f GDP) Real annual growth rates ( YR94 prices) Merchandise exports (FOB) Primary Manufactures
Merchandise imports (CIF)
7,o 13,7 16,8
1632 1092 249 1 2008 -859 414
-347
490 32
63 16
-3 1
-190
-16,8
30,2
33,7
10,7 6 9 5,4
2171 1472 3312 2686
-1 141 359
-690
539 204
-4 207
39 -92
-17,8
30,O
18,O
100 13 25 62
97 26
6 21
45 64
3 8
7550
1560
9,4 9,4
10,4 26,5 28,O
3311 1667 4727 3686
648 -1416
-1044
1190 199 -54 253 107
-452
-18,8
10,o
28,3
100 11 21 68
94 28
7 21
42 65
6 11
10098
1990
12,4 19,4
13,4 24,9 17,7
4284 1782 6579 5053
82 1 -2294
-1815
1620 207
69 138 547
-559
-22,7
2,4
26,3
100 10 20 70
94 28
7 21
43 65
6 11
12118
2420
9,o 8,3
9,9 8,7
11,3
5245 223 1 7877 6046
1036 -263 1
-2008
1820 75 64 11
780 -668
-21,7
8,O
4,8
100 9
20 71
90 28
6 22
44 63
10 14
14132
2950
8 8 14,5
8 8 12,l 12,9
6236 2639 8862 6813
1123 -2626
-1984
1700 75 34 41
657 -448
- 18,6
10,7
18,9
100 8
19 73
88 28
5 23
44 61
12 16
16179
3400
7,o 13,4
6,5 10,5 11,3
7187 2960 9822 7573
-2635 1196
-2026
1620 75 9
66 723
-393
-16,3
7,4
15,4
100 8
19 73
87 28
5 23
44 59
13 16
18522
3900
7,o 12,6
6,6 10,6 9,6
8185 3346
11006 8553
1288 -282 1
-2153
1650 75
-20 96
800 -372
-15,2
7,4
17,6
39
(Con tin ued) Georgia - Key Economic Indicators
(Continued)
Actual Estimate Projected Indicator 2004 2005 2006 2007 2008 2009 2010 2011
Public finance (as % of GDP at market prices)e Current revenues 21,2 Current expenditures 17,3 Current account surplus (+) or deficit (-) 3,9
Foreign financing 1,1 Capital expenditure 2,4
Monetary indicators M2/GDP 15,5 Growth o f M2 (%) 42,4 Private sector credit growth / 9849,4 total credit growth (%)
Price indices( YR94 =loo) Merchandise export price index 105,2 Merchandise import price index 127,5 Merchandise terms o f trade index 82,5 Real exchange rate (US$/LCU)' 95,7
Real interest rates Consumer price index (% change) 5,7 GDP deflator ("h change) 8,4
22,8 25,5 28,9 27,8 26,5 26,O 26,l 20,9 23,O 26,8 25,6 23,9 23,2 22,4
2,o 2,5 2,1 2,3 2,6 2,9 3,7 4,2 5 3 7,o 6,8 6,O 5,3 5,o 0,2 0,3 1,4 1,2 0,7 0 s 0 2
16,6 20,O 21,7 22,7 23,8 25,O 22,2 26,5 39,7 35,8 24,5 22,2 20,2 4 8
156,9 329,9 223,l 42,3 120,2 78,7 181,5
109,l 112,2 117,l 135,8 145,O 151,4 159,3 144,6 154,6 167,8 191,6 181,6 174,9 168,O 75,4 72,6 69,8 70,9 79,8 86,5 94,8 98,7 93,2 80,9 75,7 71,5 68,l 65,O
8,3 9,2 11,O 10,O 9,o 8,O 8,O 7,9 5,7 11,5 9,o 8,O 7,o 7,o
a. b.
d. e. f.
C.
GDP at factor cost "GNFS" denotes "goods and nonfactor services." Includes net unrequited transfers excluding official capital grants. Includes use o f IMF resources. Consolidated central government.
"LCU" denotes "local currency units." An increase in US$/LCU denotes appreciation.
40
Georgia Social Indicators Latest sinale vear Same reaionlincome aroua
POPULATION Total population, mid-year (millions)
Urban populalon (% ofpopulakn) Total fertility rate (births per woman)
POVERTY (% ofpopulabn) National headcount index
Urban headcountindex Rural headcount index
Growth rate (% annual average forperiod)
INCOME GNI per capita (US$) Consumer price index (2000=700) Food price index (2000=700)
INCOMElCONSUMPTlON DISTRIBUTION Gini index Lowest quintile (% of income or consumption) Highest quintile (% of income or consumption) SOCIAL INDICATORS Public expenditure
Heath (% of GDP) Education (% of GNl)
Net prlmary school enrollment rate (% of age group)
Male Female
Access toan Improved water source (% ofpopulabn)
Urban Rural
Total
Total
Immunization rate (% ofchildren ages 12-23 months)
Measles DPT
Child malnutrition (% under5 years) Life expectancy at birth (Yeam)
Total Male Female
Mortality Infant (per 1,000 live bitths) Under 5 (per 1,000) Adult (1569)
Male (per 1,000 population) Female (per 1,000 population)
Maternal (per 700,OOOlive births) Births attended byskilled health staff (%)
1980-85
583 088
53,8 2 3
70 66 74
48 52
210 94
199oa5
5,O -1,6 53,9
1,7
51 0 52
97 97 97
61 79
70 67 74
41 45
195 90
2000-06
4,4 -1 ,o 52,5
1,4
54,5 56,2 52,7
1560 145
40,4 5 6
46,4
1 ,o
93 93 92
76 90 61
86 78
71 67 75
28 32
21 9 84 30
Europe & Central
Asia
460,O 0,o
63,8 1,6
4 796 139
4,3 4,4
90 91 90
92 99 80
96 95 5
69 64 74
28 33
324 137 60 94
Lower- middle- income
2 275,9 1 ,o
47,3 2,1
2 037 138
2,1 4 8
93 93 92
81 93 71
85 85 13
71 69 73
31 40
169 109 155 85
CAS Annex 85. This table was produced from the CMU LDB system. 04/16/08 Note: 0 or 0.0 means zero or less than half b e unit shown. Net enrollment rate: break in series between 1997 and 1998 due to change from ISCED76 to ISCED97. Immunization: refers to chiklren ages 12-23 months who received vaccinations before one year of age or at any time before the survey.
41
Georgia - Key Exposure Indicators
Actual Estimated Projected Indicator 2004 2005 2006 2007 2008 2009 2010 2011
Total debt outstanding and disbursed (TDO) (US$m)a
Net disbursements (US$m)'
Total debt service (TDS) (US$m)a
Debt and debt service indicators ("4
TDOEGS~ TDO/GDP TDS/XGS ConcessionaliTDO
IBRD exposure indicators (%) IBRD DS/public DS Preferred creditor DS/public DS ("A)' IBRD DS/XGS IBRD TDO (us$mld
O f which present value o f guarantees (US$m)
Share o f IBRD portfolio (%) IDA TDO (US$mld
2064
-2
234
98,O 40,3 11,l 61,2
40,O
678
1911
-17
165
71,O 29,s 6 1
65,3
48,l
679
2002
21
25 1
52,6 26,5
6 6 63,5
0,o 43,7
0,o 0
0 784
1965
25
129
39,6 19,5 2,6
72,2
0,o 63,O
0 8 0
0 864
2496
515
167
40,7 20,6
2,7 593
0,o 68,O
0,o 0
0 906
2797
297
174
38,7 19,s
55,O 2,4
0 8 73,O
0,o 0
0 946
2965
269
161
35,9 18,3 2,o
52,9
0,o 71,l
0,o 0
0 974
3155
128
168
33,6 17,O
1,s 49,7
0,o 69,s
0,o 0
0 983
IFC (US$m) Loans Equity and quasi-equity /c
MIGA MIGA guarantees (US$m)
a. Includes public and publicly guaranteed debt, private nonguaranteed, use of IMF credits and net short-
b. "XGS" denotes exports o f goods and services, including workers' remittances. c. Preferred creditors are defined as IBRD, IDA, the regional multilateral development banks, the IMF, and the
Bank for International Settlements. d. Includes present value of guarantees. e. Includes equity and quasi-equity types of both loan and equity instruments.
term capital.
42
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A J A R AA J A R A
A B K H A Z I AA B K H A Z I A
TkvarceliTkvarceli
DzvariDzvari
SenakiSenaki
SamtrediaSamtredia
TkibuliTkibuliSachkhereSachkhere
KhashuriKhashuri
TTs'khinvalis'khinvali
MestiaMestia
OniOniKazbegiKazbegi
MarMarneulineuliTTsiteli-siteli-TTskaroskaro
LagodehiLagodehi
AhalkalakiAhalkalakiKazretiKazreti
NinocmindaNinocminda
AkhmetaAkhmeta
GurjaaniGurjaani
OzurgetiOzurgeti
KutaisiKutaisi
TTelavielavi
RustaviRustavi
MtskhetaMtskheta
AmbrolauriAmbrolauri
GoriGori
ZugdidiZugdidi
AkhaltsikheAkhaltsikhe
T'BLISIT'BLISI
SouthSouthOsset iaOsset ia
A D J A R A
SouthOsset ia
A B K H A Z I A
Gagra
Ochamchira
Tkvarceli
Dzvari
Senaki
SamtrediaPoti
Kobuleti
TkibuliSachkhere
Khashuri
Mestia
OniKazbegi
MarneuliTsiteli-Tskaro
Lagodehi
AhalkalakiKazreti
Ninocminda
Akhmeta
Gurjaani
Ozurgeti
Kutaisi
Telavi
Rustavi
Mtskheta
Ambrolauri
Gori
Zugdidi
Akhaltsikhe
Suhumi
Batumi
Chinvali
T'BLISI
R U S S I A N F E D E R A T I O N
T U R K E Y
A R M E N I A A Z E R B A I J A N
Rioni
Inguri
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Kvirilk
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Iori
Mtkvari
(Kura)
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Mtkvari (Kura)
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B lack Sea
MingechevirReservoir
LakeSevan
To Soai
To Vladikavkaz
To Zagatala
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To Erzurum
To Erzurum
To Trabzon
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as
us
Mo
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K o l k h i d aL o
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Mqinvartsveri(5047 m)
40°E 42°E 44°E
40°E 42°E 44°E 46°E
44°N44°N
42°N 42°N
GEORGIA
This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.
0 20 40
0 10 20 30 40 50 Miles
60 Kilometers
IBRD 33410
NO
VEM
BER 2004
GEORGIASELECTED CITIES AND TOWNS
AUTONOMOUS OBLAST (AO) CENTER
AUTONOMOUS REPUBLIC (ASSR) CENTERS
NATIONAL CAPITAL
RIVERS
MAIN ROADS
RAILROADS
AUTONOMOUS OBLAST (AO) BOUNDARY
AUTONOMOUS REPUBLIC (ASSR) BOUNDARIES
INTERNATIONAL BOUNDARIES
