Georgia to lift emergency, IMF says turmoil damaging

TBILISI Thu Nov 15, 2007 11:47am EST

Georgia's parliament members attend a session in Tbilisi November 15, 2007. Georgia's parliament on Thursday approved lifting its state of emergency on November 16 at 7 p.m. (10 a.m. EST), a move that will allow people to meet in public and independent media to broadcast. REUTERS/David Mdzinarishvili

Georgia's parliament members attend a session in Tbilisi November 15, 2007. Georgia's parliament on Thursday approved lifting its state of emergency on November 16 at 7 p.m. (10 a.m. EST), a move that will allow people to meet in public and independent media to broadcast.

Credit: Reuters/David Mdzinarishvili

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TBILISI (Reuters) - Georgia's parliament on Thursday confirmed emergency laws would be lifted within 24 hours but the International Monetary Fund said the political turmoil had already damaged the country's reputation with investors.

Georgian President Mikhail Saakashvili imposed a state of emergency last week after police fired tear gas and baton charged protesters calling for his resignation.

As a concession to his opponents Saakashvili then called a snap presidential election for January 5 -- a vote Russia on Thursday called a farce.

And this political turmoil and the pre-election uncertainty has dented Georgia's image with investors, the head of the IMF's Georgian mission, Robert Christiansen, told Reuters, adding recovery was still possible.

"Recent political developments add considerable uncertainty to the projected volume of inflows for the remainder of this year and 2008," he said.

Around $2 billion will be injected into Georgia's economy this year through private investments and foreign borrowing, Christiansen said, double the 2006 figure.

Saakashvili rose to power in a peaceful 2003 revolution. The West held him up as a pioneering democrat and free market reformer in the former Soviet Union, but opponents say he has mismanaged the economy and is corrupt, charges he denies.

MONEY POURED IN

Money has poured into Georgia since Saakashvili started liberalizing the economy and privatizing former state-run companies and foreign cash -- mainly in real estate, construction, banking and tourism -- has become a vital source of income in a state with virtually no natural resources.

"I don't think there has been permanent damage at this moment, but the reputation has been hurt. Recovery is still possible," Christiansen said.

"If the election in January reduces uncertainty and get us back on track politically, then foreign capital will likely continue to come in and growth will not be seriously affected."

Western allies have piled pressure onto the Georgian government to lift the state of emergency -- which bans independent media and demonstrations -- but Tbilisi had resisted, saying it was necessary to counter Russian agents who were trying to ferment unrest.

Parliament on Thursday voted to lift the state of emergency on November 16, confirming what a top U.S. diplomat had told journalists on Tuesday, but Russia said the election had already turned into a farce.

"The early elections are a farce designed to keep power in the hands of the current leadership," the Russian foreign ministry said on its Web site.

Relations between Georgia and Russia have fallen to a low. Russia resents Georgia's drive to join both NATO and the European Union while Tbilisi accuses Moscow of supporting rebels.

(Writing and additional reporting by James Kilner in Moscow)

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