TBILISI, Dec 20 (Reuters) - The IMF has approved a further $41.6 million loan to Georgia after it demonstrated prudent macro-financial policies and sound reform implementation, the fund said on Thursday.
The credit is the fourth tranche under a three-year, International Monetary Fund programme totalling $291.5 million, bringing total disbursements to $166.3 million.
Georgia, a major conduit for Caspian oil and gas to Europe, has been recovering from falling exports and a plunge in the currencies of its main trading partners Russia, Turkey and Azerbaijan, which depressed economic growth in recent years.
“Georgia’s economic performance remains strong, but downside risks to the outlook have increased,” the IMF said in a statement.
“Despite the positive outturns, the authorities need to remain vigilant to a deteriorating external outlook and to sustain reform efforts to promote more inclusive growth.”
The Fund said that the former Soviet republic’s banking sector remained well capitalised, liquid, and profitable, but dollarisation remained high.
The inflation-targeting framework, combined with the floating exchange rate regime, continues to serve Georgia well, while the current monetary policy stance remains appropriate, it said.
Georgia’s central bank kept its key refinancing rate at 7 percent on Dec. 12, citing forecasts suggesting that annual inflation would stay close to its 3 percent target this year.
“Efforts to build international reserves need to be stepped up given heightened external uncertainty and Georgia’s vulnerability to external shocks,” the Fund said.
The central bank’s total foreign currency reserves declined to $3.089 billion on Dec.1 from $3.095 billion a month earlier. (Reporting by Margarita Antidze; Editing by Kirsten Donovan)