TBILISI, Dec 18 (Reuters) - The IMF has approved a $41.4 million loan to Georgia after the country demonstrated a robust economic performance with resilient growth and a lower current account deficit, the IMF said on Wednesday.
The loan is the sixth made to Georgia under a three-year, International Monetary Fund programme totalling $291.5 million, and brings total disbursements to $248.7 million.
The Fund said that the programme, which is aimed at promoting higher and more inclusive growth, had been extended by one year until April 11, 2021.
The government expects growth this year of around 5%, though central bank governor Koba Gvenetadze told Reuters in September that GDP might drop to 4.5% because of a dispute with neighbouring Russia and anti-government protests.
The IMF’s forecast for 2019 is growth of 4.6%. Georgia serves as a transit route for Caspian Sea oil and gas and has a growing tourism sector.
The Fund said that despite solid growth, the balance of risks was on the downside “as domestic and international uncertainties could weigh on investment, reducing medium-term prospects.”
The IMF said that the former Soviet republic’s central bank had appropriately tightened monetary policy to address inflationary pressures.
“Exchange rate flexibility remains vital as a shock absorber for the Georgian economy, and foreign exchange interventions should be limited to addressing excessive volatility or building reserves,” it said in a statement.
Georgia’s central bank raised its key refinancing rate to 9% from 8.50% on Dec. 11 amid higher inflation.
The central bank began raising rates in September as annual inflation exceeded the 3% target.
Annual inflation in November stood at 7%, up from 1.9% in November 2018 and from 6.9% in the preceding month this year.
The central bank’s total foreign currency reserves declined to $3.327 billion on Dec. 1 from $3.387 billion a month earlier. (Reporting by Margarita Antidze; Editing by Chizu Nomiyama)