The World Bank worked with Georgia to prepare their Country Partnership Strategy in the midst of two crises – the August 2008 conflict and the global economic downturn.
For this reason, the joint strategy of the World Bank / International Finance Corporation targets immediate post-conflict and vulnerability issues, and strengthening the foundations for competitiveness and growth in the future.
RESULTS
Roads Rehabilitation Program
World Bank support for transport infrastructure focus mostly on road improvements to help reduce transport costs, improve internal connectivity, and strengthen Georgia’s role as a transport corridor within the South Caucasus. This is being done in coordination with other donors using common technical standards, implementation arrangements, and safety measures. A key objective is to make Georgia’s roads not only better and faster, but also safer.
Since 2006, the Bank has approved US$ 369 million for roads projects in Georgia. These include: a US$ 30 million IBRD (International Bank for Reconstruction and Development) loan for the Kakheti Regional Roads Improvement Project and a US$ 28 million IBRD loan for the Additional Financing of the First East-West Highway Improvement Project. The Kakheti Roads project will help to reduce transport costs and improve access and traffic safety for the Kakheti regional roads. The Additional Financing will support rehabilitation of the Rikoti Tunnel, repair its 4.2 km by-pass road, and help to strengthen road sector institutions.
The program started with a US$ 19 million First East-West Highway Improvement Project in 2006, followed by the US$ 35 million financing in 2008, and US$ 147 million for the Third East-West Highway Improvement Project in 2009. In addition, US$ 90 million was approved for the Secondary and Local Roads Project.
For more information on results achieved to date, please visit the Project Briefs here:
The first cohort of 103 Primary Health Care facilities in high mountain regions of Imereti, Adjara and Shida Kartli are fully operational - rehabilitated, equipped, staffed with trained personnel and reimbursed with the newly defined mechanisms. The Family Medicine Faculty, established in the State Medical University, alongside with the network of 5 national training centers is actively involved in the training of Primary Health Care personnel.
Key achievements include:
30% of population covered with re-trained family medicine providers, compared to 0.6% at the beginning of the project. It is expected that the indicator will reach 50% by the end of the project.
72% of rural population has access to a Primary Health Care clinic within 30 minutes of transportation/walking – way above the target of 50%.
Increased immunization rate of DPT3 increased by 20 percentage points and reached about 98% in 2009.
80% of population is satisfied with Primary Health Care services in target areas, as measured by the utilization survey
Number of TB patients managed at the Primary Health Care level has increased 3% to 52%.
Public health expenditure earmarked to program for poor has increased from 3.6% to 35%.
Education System Realignment and Strengthening Project (APL 2)
Results achieved to date:
Second round of national student assessments is being implemented by the National Curriculum and Assessment Center (NCAC).
A new curriculum for general secondary education has been introduced in all grades except for grade six; further revisions are currently being introduced to the curriculum and the implementation of these new changes for grades 1 to 6 will take place in 2011-2012 academic years in all schools across the country.
Percentage of children learning according to the improved national curriculum has improved from 2 to 80% over the past 4 years. This has exceeded the original target of 70%. 1st round of teacher certification took place in July 2010 and 11% of participating teachers (or less than 2% of all teachers) have been certified. The target of 25% has not yet been achieved since based on the Government’s decision the certification process started 2 years later than initially envisaged.
Construction of 3 schools has been finalized and 4 more schools are far advanced, As a result, 2130 students out of 3296 who previously studied in schools identified as in emergency condition are now in safe and improved learning environment.
Rural Development Project
Results achieved to date:
Support has been provided to three supply chains (wine, citrus and hazel nuts), including technical assistance and demonstrations for improved agricultural practices.
Subsidiary loan agreements were signed with 4 commercial banks that have provided 27 sub-loans totaling US$5.7 million to a variety of agricultural sub-sectors. Subsidiary loan agreements have also been signed with micro finance institutions, which provided more than 5,000 micro loans.
An Action plan for the Food Safety Agency was developed. Ministry of Agriculture laboratory rehabilitated and equipment installed.
“Continuously Operating Reference System” has been purchased for the National Agency for Property Registry and will be installed shortly.
Regional & Municipal Infrastructure Development Project
Results achieved to date:
The Project picked up pace quite rapidly soon after effectiveness, and has already achieved some notable results:
About 3600 Internally Displaced People (IDPs) have benefited from the construction of 783 houses under the Project. The EU and World Bank signed in June 30, 2010 an administrative agreement by which the EU will provide EUR 3.00 million co-financing to the IDP house improvement and infrastructure expansion activities.
The Project has also implemented 49 water, wastewater and road subprojects throughout Georgia in 22 Local Self-Governments. Most of the subprojects have been completed, or will be completed before the end of 2010. Achievement of outcome indicators will be measured as soon as all of the sub-projects will be completed.
Public Sector Financial Management Reform Support Project
Results achieved:
Costed expenditure strategies included in 2010-2013 Basic Data and Directions (BDD) document cover about 88% of executive branch expenditures as approved by 2010 Budget Law; results-based sectoral strategies were prepared by three pilot ministries (Justice, Education, and Health) and presented to the Parliament as information annex only, not subject to approval by the legislator.
Ministry ceilings as per the Government’s Decree of June 11, 2009 are about 25% less than respective BDD estimates approved. This differences partially explained by the fact that ceilings do not include funds received from international financing sources (credits/grants) which account for about 66% of the variation.
Budget execution bi-annual and annual reports are prepared and issued on time.
Central personnel database for all staff (4,200 records) of the Ministry of Finance supported through locally developed software by MoF IAD Dept. currently covers MoF needs.
FY 2008 on-site annual audits covered 28% of central government expenditure; 2009 audit report is due by June 2010.
Budget information by years, BDDs, Government financial statistics and information about Central Government debt is published on the MoF website and updated; Citizens Guides to State Budget and BDD published regularly since 2006 and disseminated to Parliament and other stakeholders; Citizens Guide on Tbilisi 2009 Budget as well as brief review of its 6 months execution published in 2009.
“Country Partnership Strategy with Georgia has been prepared against the backdrop of twin crises – the August 2008 conflict followed by the global economic downturn. As a result, the joint World Bank/International Finance Corporation strategy focuses on pressing post-conflict and vulnerability issues, and strengthening the foundations for competitiveness and growth in the future,” said Asad Alam, World Bank Regional Director for the South Caucasus.
Growth and External Performance
Economic recovery is gaining strength, with real GDP growth of 6.6 percent in the first half of 2010. This follows a contraction of 3.9 percent in 2009 resulting from the shocks of the August 2008 conflict and the global economic crisis. Real economic activity is picking up in 2010, with growth in exports, worker remittances, real estate transactions, vehicle registrations, and construction permits. Exports were up by 40 percent (year on year) during the first half of 2010 and imports were up by a more modest 12 percent (year on year). During the same period, VAT turnover increased by 27 percent (year-on-year) after being down by 7 percent during 2009. At the same time, bank lending is only recently showing signs of a modest pickup, while FDI inflows remain far below pre crisis levels and were down significantly to $273 million in the first half of 2010.
The economy is projected to grow by 5.5 percent in 2010 and 4-5 percent during 2011-13, although downside risks from global economic uncertainties are significant. Growth is expected to come from higher exports and private investment, supported by a pickup in bank lending. Exports, expected to play a key role in driving economic recovery, are projected to expand from 29.8 percent of GDP in 2009 to 38 percent during 2011-2013. Export growth is expected to come primarily from metals and metal products, wines and other beverages, fruits and nuts, and repaired and re-exported cars on the product side; and transport and tourism on the services side. Private investment is expected to benefit from a pickup in bank lending in 2010 and modest improvement in FDI inflows from 2011. There is, however, significant uncertainty regarding the pace of recovery and growth, as weakness in external markets undermines Georgian exports and tourism and raises refinancing costs for both the public and the private sector.
As FDI and other private inflows have fallen, official transfers have increasingly financed the current account. The external current account deficit adjusted significantly from 22.7 percent of GDP in 2008 to 11.9 percent in 2009, primarily due to a contraction in imports. With FDI and other private capital inflows falling sharply, the current account has increasingly been financed by higher public sector flows and IMF resources. The macroeconomic framework is supported by an IMF Standby Arrangement for $1.15. Since the economic downturn the authorities have allowed the exchange rate to adjust over time to facilitate external adjustment though they have periodically intervened to support the exchange rate in face of heavy foreign exchange pressure. Since January 2010, the currency has depreciated by about 10 percent to 1.84 Lari per dollar.
Georgia joined the World Bank in 1992 and the International Development Association (IDA) in 1993. The Bank has provided financing for 50 projects in different sectors totaling over $1.47 billion of IDA Credits and Grants, and IBRD Loans, of which about 84% has already been disbursed. Approximately 62% of the Bank financing for Georgia comes for investment projects while 38% is directed to budget assistance through development policy operations.
The new Country Partnership Strategy (CPS) approved by the Board in September, 2009 with new planned IDA/IBRD lending of about $396 million largely responded to the two crises Georgia was hit with in the previous year - the August conflict with Russia and then the global economic downturn. The strategic objectives of the CPS are to (i) meet post conflict and vulnerability needs, and (ii) strengthen competitiveness for post-crisis growth. Given the short-term financing needs, the Government requested maximum frontloading of financial flows from both IDA and IBRD sources. To that end, the FY10 lending program amounted to $290 million and represented the highest volume since joining the Bank.
Analytical And Advisory (AAA) Program: The Bank delivered a major piece of AAA at the beginning of FY09 – the Joint Needs Assessment (JNA) where it worked across sectors and with key development partners and the Government to prepare a comprehensive needs assessment in the aftermath of the August conflict. The Bank co-chaired (with the EC) a donors meeting in October 2008 at which donors pledged $4.5 billion over three years. The Bank delivered the first JNA Progress Report at the end of FY09 and second report in June, 2010. The Bank also provided programmatic poverty and Public Expenditure Review (PER) support, including preparing a joint Public Expenditure and Financial Accountability Assessment (PEFA) with the EC and a full poverty assessment published in April 2009. The Bank also provided financial sector advisory TA, including on the inter-bank payment system, and is currently providing technical assistance to the GeoStat.
In FY11, the Bank will continue to provide programmatic PER and poverty Technical assistance (TA) support, financial sector advisory TA, and will work on EU FTA agreement. We will also deliver South Caucasus Standards and Quality TA covering all three countries.
Current Portfolio consists of 12 active investment projects, financed by 12 IDA Credits/Grants and 4 IBRD loans for a total of $469 million, of which about $183 million is undisbursed. In addition, the second in a series of the Development Policy Operations – DPO2 was approved by the Board in July, 2010 with total financing of $50 million.
Doing Business 2010
“Doing Business 2010: Reforming though Difficult Times” was the seventh in a series of annual reports published by IFC and the World Bank. This year, Georgia achieved significant progress and ranked 11th on the ease of doing business among 183 economies worldwide by implementing reforms in dealing with construction permits and trading across borders. However, there are still areas for improvement. For example, while being 2nd globally in registering property and 5th in starting a business, Georgia is ranked 95th in closing a business and 64th in paying taxes. Doing Business analyzes regulations that apply to an economy’s businesses during their life cycles, including start-up and operations, trading across borders, paying taxes, and closing a business. "Georgia has pursued an impressive public policy reform approach, and we welcome this initiative of the Government in discussing future changes to ensure broader dialogue with society, that will foster investments and economic growth in this country and improve people’s living standards,” said Asad Alam, World Bank Regional Director for the South Caucasus at the first round-table with the government and with a broad spectrum of stakeholders, that focused on investment climate issues.
Read more on Broadening Open Communications on Key Policy Issues by visiting this web page.
NB: Lending is per fiscal year, July 1-June 30
Active Portfolio by Sector as of October, 2010 (US$ millions)
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