Commission proposes 46 million Euro macro-financial assistance to Georgia

The European Commission proposes to provide macro-financial assistance to Georgia in the form of grant instalments of up to ˆ46 million. This assistance which is part of a comprehensive Community package of up to EUR 500 million to support Georgia's economic recovery in the aftermath of the August 2008 armed conflict with Russia will support the adjustment programme agreed by the Georgian government with the International Monetary Fund to help the country through the global crisis. The Community macro-financial assistance will contribute to covering Georgia's external financing needs in 2009-2010.

The Commission adopted on 16 October 2009 a draft decision recommending to the Council to provide macro-financial assistance (MFA) in the form of a grant of ˆ46 million to Georgia. The assistance supports, and is conditional on the respect of the adjustment programme agreed between Georgia and the IMF. It complements the latter's financial assistance to the country. The grant would be provided in two instalments, tentatively in the fourth quarter of 2009 and first half of 2010. The European Parliament is consulted.

This assistance is part of a comprehensive Community package of up to EUR 500 million to support Georgia's economic recovery pledged at the October 2008 Donor Conference in the aftermath of the August 2008 armed conflict with Russia. The Community macro-financial assistance will contribute to covering Georgia's external financing needs in 2009-2010.

The military conflict with Russia that erupted in August 2008 dented the strong growth performance of the previous years. The global financial and economic crisis that strongly affected Georgia further exacerbated the economic downturn caused by the military conflict. The real GDP is expected to decline by 4% in 2009. Despite the balance of payments adjustment so far, Georgia's external position remains fragile.

The macro-financial assistance is an exceptional EU crisis response instrument available to EU neighbours. It is conditional to and complements assistance by the IMF. The IMF capacity to help countries with financial difficulties is being considerably increased by EU Member States and other IMF members. The EU recently committed to provide ˆ125 billion to the IMF, which is 35% of the increase in the IMF's lending capacity from $250 billion to $750 billion.

The EU macro-financial assistance grants are financed by the EU budget. For more information on past MFA, including annual reports go to:

http://ec.europa.eu/economy_finance/financial_operation_instruments/market_operations398_en.htm