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Alarming prospects from IMF office in Tbilisi

2009-04-01 13:19

2/1/4/2214.jpegInternational Monetary Fund experts warned the government of Georgia about the risks threatening the country's economy. They advised to redirect defense funds to social sphere. However Tbilisi has already appointed "scapegoats" in case of collapse.

Georgia's economy is in great jeopardy of a collapse, international Monetary Fund (IMF) warned.


"The blow to the current and net assets is supposed to be more lasting and powerful than expected before, - it is stated in the Tbilisian office of the fund. Financial experts backed Georgia's tax lowering activities and advised to focus more on investments and infrastructure than on army upgrade with the help of imported arms. Besides Western financiers are dissatisfied with lari rate support by way of currency holdings.

Following this warning Yasha Meskhia, Vice President of Academy of Economic Studies severely criticized Georgian authorities and their Olympic calmness at the time of crisis. According to him the country is on the threshold of deceleration of economic growth and reduction in flow of investments, Georgian media report. Meskhia believes the government must urgently work out a scientifically grounded anti-crisis scheme. And while this is not done business community tries to find ways out of crisis on its own. Today Temur Chkonia, a famous businessman, addressed a letter to the country's president asking for a financial amnesty. In his interview with Kommersant radio he specified: "Today business is settling debts accumulated before 2004. The cases are referred to court. It is noteworthy that the indebtedness is not displayed in the budget and in reality the budget loses nothing. While for business people this will be a kind of investment. So the amnesty is simply essential".

His proposal was supported by Georgian Steel project manager Mikhail Janikashvili and Rachulo Guino director Omar Chelidze. They emphasize that by tax debt remission the state will demonstrate its goodwill towards businessmen. By the way the tax amnesty proposal is very much in line with the IMF anti-crisis doctrine suggesting fiscal indulgence and shortfall compensation via Western grants.

Certainly businessmen are definitely not the worst affected part of Georgian society. But under restrictions of resource shortage everyone gets very egoistic. Farmers demand appropriations-in-aid, winemakers ask the state to sell their products. Insurance companies are staying up thanks to populist Affordable Insurance state program and doctors raise their prices and complain about insurers' payment defaults. Business community puts the blame for crisis on high bank loan rates while bankers reproach business people for poor management urging construction companies to lower home prices.

One of the live discussions between the banking and real sectors was held on Kommersant radio. President of Association of Banks of Georgia Zurab Gvasalia stated that Georgian business was not managed properly and financial organizations had limited loans for entrepreneurs because of eventual risks. The banker's outshot was countered by reciprocal accusations from Via Travel Director General Siko GEgidze: "There is no place in the world where banks would make loans at 39%. In Europe bank loan interest rates were lowered and disbursement terms deferred. And what do we have here? Only statements are made".

Expensive lending encouraged spring-up of new microfinancial organizations (EasyCredit Georgia, Pokosito Credit) and boost of the existing ones. They make small loans at high interest rates (up to 45% per annum) and provide cash transfers.

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