· In infrastructure support is being provided through the Municipal Development and Decentralization Credit and the Social Investment Fund Credit. These projects are providing financing at the community level for critical infrastructure needs, primarily for school and health facilities heating and repair, small hydropower schemes to provide electricity, drinking water and sanitation rehabilitation, as well as transportation infrastructure rehabilitation.
· In rural development IDA credits have supported the development of private sector farming and agro-processing improvements, agricultural credit, irrigation and drainage, and agriculture research and extension. IDA has also been supporting the creation of local institutions such as rural credit unions and water users associations through its Credits.
Areas in which the World Bank leads and its analysis serves as input into the IMF program
4. The Bank has been leading the dialogue on structural reforms through SAC 3, approved by the Bank’s Board of Executive Directors in June, 1999, and closed in October, 2002. Despite considerable delays, the core conditions of SAC 3 were met, but their impact was reduced by poor governance. Institution building and technical assistance has been supported through the Structural Reform Support Credit, also approved by the Bank’s Board of Executive Directors on June 29, 1999. The Bank also leads in the areas of:
· Private sector development. SAC 3 supported improvements in the environment for private sector development, focusing on: (i) simpler licensing regulations; (ii) more transparent government procurement; (iii) reduced cost of entry for businesses; and (iv) privatization of state-owned commercial assets. IDA has also been supporting private sector participation in other areas such as energy, telecommunications, urban services and agriculture. The IMF has worked with the authorities to initiate audits of the 2002 accounts of three major state owned enterprises.
· Energy. The energy system is in poor condition, with unreliable supply, massive non-payment and mounting debts. IDA has been working with other donors, including the IMF, to encourage more private management and ownership, and to implement a series of short-term action plans to improve the overall functioning of the sector. The IMF has also been focusing on improved payments for electricity.
· Public Sector Management. The Bank is supporting the development of a civil service reform program, while the Fund is providing technical assistance in support of tax and customs administration reform.
Areas of shared responsibility of the World Bank and IMF
5. The Bank and the Fund have been working jointly in the following main areas (supported by the Bank’s SAC 3 and Structural Reform Support Credit, several investment operations and the Fund’s PRGF):
· Poverty Reduction Strategy. Both institutions have been working closely with the Government to provide support to the development of the PRSP, through seminars and workshops, direct staff input, and a multi-donor Trust Fund to support the work of the PRSP secretariat..
· Budget Planning and Execution. The annual process-based Public Expenditure Reviews will provide the underpinnings for systemic changes in expenditure management, with the immediate aim being improved budget formulation in 2004. The IMF is focusing on Treasury reform within the Ministry of Finance.
· Financial Sector Reforms. The joint Financial Sector Assessment Program has supported: (i) strengthened banking and non-banking supervision; (ii) introduction of international accounting standards; (iii) and consolidation of banks through higher capital requirement ratios; and (iv) anti money-laundering legislation. The IMF has focused in particular on banking supervision.
· Debt Sustainability Analysis (DSA). Given Georgia’s heavy external debt burden, the Bank and the Fund conduct joint Debt Sustainability Analysis on a regular basis.
Areas in which the IMF leads and its analysis serves as input into the World Bank program
· Fiscal Framework. The IMF’s focus on prudent fiscal policy has served as an important framework for IDA’s work on public expenditure management.
Areas in which the IMF leads and there is no direct World Bank involvement
· Monetary Framework. The IMF closely collaborates with the NBG in the design and implementation of a monetary program that aims at remonetization of the economy, while keeping inflation low and the exchange rate of the Lari stable
· Economic Statistics. IMF technical assistance has been conducive to improvements in national accounts, price, monetary and government financial statistics.
5.1.5 The World Bank Country Assistance Strategy for Georgia
Activities (as identified in the EDPRP) |
Responsible Agencies |
Focus of Bank Actions |
Expected Results FY04-06 |
Bank Group Program |
Part-ners |
WB Performance Indicators for End FY06 |
Improvement of Governance |
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· Development of a comprehensive, long-term concept and action plan of executive government reforms, and of a program to improve structure and number of employees in organizations under budgetary financing |
State Chancellery, Ministry of Justice, Ministry of Finance relevant executive government bodies |
Assistance to the State Chancellery in carrying out a functional analysis of the central government agencies and assessment of budgetary employment, remuneration, and training policy; on the basis of the above studies, develop recommendations |
Widely owned program to improve functioning of government administration and agencies; remuneration and retrenchment policy for core civil service introduced, and plans for civil service training developed |
Public Sector Management Project |
DFID, USAID, UNDP |
Initiation of reform and restructuring of civil service |
· Inventory of normative acts defining the competence of government agencies to avoid duplication of local government functions |
State Chancellery of Georgia, Ministry of Justice |
Review of the existing legal framework |
Initiation of legislative change and amendments |
Public Sector Management Project; Public Expenditure Reviews |
DFID EU USAID UNDP |
Duplications and overlap among the central state agencies reduced, mandates more clearly defined |
· Distinction of municipal property from central government and private property |
State Chancellery, Ministry of Economy, Industry and Trade, Agency of State Property Management, Ministry of Justice, Ministry of Finance |
Advice on financing mechanism for transfer of road and transport properties and legal mechanisms for owning and managing very low volume farm access roads |
Revised functional/administration classification of roads; sound allocation formula for dividing Road Fund revenues between road owners |
Secondary Roads Project; Trade and Transport Facilitation Project; Rural Infrastructure Study |
Kuwait Fund for Economic Development |
New road classification; new procedures for managing the road fund, including allocation of funds between road owners |
Macroeconomic Stability |
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· Preparation of indicative plans of development for the economy for 2004 and 2005 |
Ministry of Economy, Industry and Trade |
Improvement of linkage between policy, resource constraints and budgets |
Develop a more realistic medium-term budget framework |
Public Expenditure Reviews, PRSC in High Case |
IMF DFID |
Budget execution closer to planned |
· Initiate the process to convert a portion of government debt liabilities into long-term debt instruments |
National Bank |
Assistance to the MoF develop long-term debt instruments, e.g. government bond market |
MoF starts to use medium to long-term government bonds to replace the rolling of short-term debt instruments |
Financial Sector Advisory Program |
IMF |
1-10 year government bond market in place |
· Improvement of the management of international reserves of the NBG |
National Bank |
Advise to National Bank on management of reserves |
Increased import coverage |
Financial Sector Advisory Program |
IMF |
Gross foreign reserves to reach over 2 months of imports |
· Completion of tax and customs administration reform |
Ministry of Finance, State Tax and Customs Departments |
Development of a business-friendly tax environment |
Increased collection of excise taxes and improved VAT administration |
Public Expenditure Reviews, Business Environment Study, PRSC in High Case |
IMF USAID EU |
Collection of excise taxes to reach over 2 percent of GDP |
· Implementation of treasury reform, centralization of treasury service; development and introduction of commitment accounting and control system; development and introduction of expenditure control system |
Ministry of Finance |
Assistance to the MOF to improve its cash and debt management capacity and skills |
Consolidation of effective control system, and adoption of a single treasury account |
CPAR Updates, Public Expenditure Reviews, PRSC in High Case |
IMF |
Improved cash management and debt management capacity |
· Improve government procurement system and expand scope of its coverage |
State Procurement Department, Ministry of Economy, Industry and Trade |
Establishment of a transparent state procurement system; decentralization of State procurement functions to line agencies |
Greater efficiency and competition within the system; reduced delays and corruption in procurement process |
CPAR, Public Expenditure Reviews, PRSC, project lending (e.g. Secondary Roads and Trade and Transport Facilitation) |
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Recommendations of Country Portfolio Assessment Report implemented |
· Gradual increase of the share of targeted programs in the state budget |
Ministry of Finance, Ministry of Economy, Industry and Trade |
Develop program-based budgeting |
Improve consistency between medium-term indicative plan and the budget |
Public Expenditure Reviews, Public Sector Management Credit, PRSC in High Case |
DFID |
Public Expenditure Reviews assessment of better targeting of programs in the budget |
· Inventory of budgetary arrears |
Ministry of Finance |
Establish accurate estimates of past government liabilities |
Better information on, and reduction in, arrears |
CFAA Updates, Public Expenditure Reviews |
IMF |
Reduced arrears |
· Increase the number of participants in treasury bill market and improve bidding mechanisms to increase maturity and reduce the discount rate through market |
Ministry of Finance, National Bank, National Commission of Securities |
More competitive and efficient T-bill market |
Short term: more participants for competitive bidding, and for non-competitive quota; medium term: cash management, coordination between MOF & NBG on T-bills/open market operations; long term: independent debt management office |
Financial Sector Advisory Program, PRSC in High Case |
USAID FIRST |
Lower T-bill yield |
· Develop legislation promoting the activities of investment funds in order to introduce best corporate management practice in enterprises and develop stock market |
Ministry of Finance, National Commission of Securities |
Help build legal environment for investment funds; provide information/advice |
Establishment of legal environment for investment funds |
Financial Sector Advisory Program |
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Regulation of investment funds in place; NCS has capacity to supervise those funds |
· Prepare and adopt bill “on Personification and Registration of Insurance Contributions to Social Insurance System” required for regularizing first (distributive) pillar of pension system and development of pensioners’ personified registration system |
Ministry of Labor, Health and Social Protection |
Support to Ministry of Labor, Health and Social Protection on legal reforms and their implementation |
Law adopted successfully |
Social Protection Reform Project |
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Regularization of 1st pillar of pension system; better links between pensions and contributions |
· For private pension funds, adopt statutory normative acts in accordance with the laws “on Non-Government Pension Funds” and “on Securities Market” |
National Securities Commission, Ministry of Labor, Health and Social Protection |
Support to National Securities Commission and Ministry of Labor, Health and Social Protection on legal reforms and their implementation |
Normative acts developed and adopted |
Social Protection Reform Project |
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Improved regulatory environment in the area of private pensions |
· Prepare amendments to the Tax Code and investment rules of pension assets to promote the development of non-banking financial sector, including nongovernmental voluntary insurance system |
Ministry of Finance, State Service of Insurance Supervision, National Commission of Securities |
Support to relevant agencies on amendments to tax code and investment rules |
Improved functioning of non-banking financial sector, including insurance companies/private pension funds |
Social Protection Reform Project |
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Greater and more effective role for non-banking financial sector, including insurance companies and private pension funds |
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