IMF Advocates for Enhanced Autonomy of Georgia's Central Banking System
The International Monetary Fund (IMF) has issued recommendations for Georgia to enhance the institutional independence and financial autonomy of its central bank, the National Bank of Georgia (NBG). The IMF's concerns centre around the NBG's ability to determine how much of its annual profit is transferred to the state budget.
During its visit to Georgia on June 4, the IMF outlined its concerns about the governance structure of the NBG in the Article IV Consultation summary. The Fund's recommendations focus on limiting discretion in transferring funds to the government and separating the central bank's finances from the government's fiscal operations.
In 2023, the NBG transferred 303 million GEL out of a total profit of 559 million GEL to the government. This figure increased to 670 million GEL in 2024, out of a total net profit of 1.1 billion GEL. The transfer of funds in 2023 and 2024 exceeded the amounts transferred in previous years.
The IMF maintains that these discretionary transfers pose a risk to the operational independence of the NBG. To address this, the Fund recommends legal amendments to prohibit all forms of discretionary transfers from the NBG to the government. The specific legal amendments are yet to be detailed, but they are expected to ensure that any financial transfers are transparent, based on clear criteria, and subject to parliamentary or judicial oversight to prevent political interference.
The IMF acknowledges the appointment of a new governor and the hiring for vacant board seats at the NBG as steps forward. However, the Fund emphasizes the need for deeper institutional reforms to safeguard the central bank's independence.
The IMF continues to emphasize the importance of institutional reforms to maintain the independence of the NBG. The Fund's recommendations do not mention any specific timeline for implementing the suggested reforms.
The IMF's concerns about the governance structure of the NBG extend beyond just the transfer of funds to the government. The Fund has identified a risk in the lack of legal safeguards against discretionary financial support to the government beyond profit-sharing by the NBG.
Despite these concerns, the IMF maintains a strong growth forecast for Georgia in 2025 at 7.2%. The Fund's recommendations are part of broader efforts to enhance central bank independence and governance, ensuring that the NBG operates without undue political influence, which is crucial for maintaining monetary policy stability and credibility.
The IMF recommends legal amendments to limit discretionary transfers from the National Bank of Georgia (NBG) to the government, as these transfers pose a risk to the operational independence of the central bank. The IMF's focus on financial autonomy includes concerns about the lack of legal safeguards against discretionary financial support to the government beyond profit-sharing by the NBG, a critical issue in business and finance.
