The Eurasia Foundation The International Monetary Fund Conference

1
The Eurasia Foundation/The International
Monetary Fund Conference

• Aleksi Aleksishvili
• Minister of Finance
• June 1-2, 2006
• Georgian National Bank
• Tbilisi, Georgia

2
Medium-Term Action Strategy of the Government

• Motto State for a person
• Sustainable economic growth
• Formation of flexible, accountable and capable
  governance
• Rehabilitation and development of infrastructure
• Achievement of consistence with NATO membership
  requirements.

3
Macroeconomic policy

• In the medium term, our macroeconomic policy will
  be directed towards ensuring macroeconomic
  stability
• Sustainable and high rate of economic growth
• Low inflation
• Increase of local and foreign investments
• Public debt sustainability, new loans only for
  investment purposes

4
Main Macroeconomic Indicators
5
Reforms in Public Finance Management

• Aim to plan and budget strategically for the
  medium-term
• Achievements so far
• 2005 start made with the introduction of the
  MTEF
• 2006 MTEF document gives comprehensive linkage
  of national and sectoral strategies and targeted
  budget allocations
• Actions 2007-2010
• Further strengthening of MTEF as principal
  decision-making tool.
• Improving the budget planning process

6
Tax Reforms

• Number of taxes reduced previous 22, now only 8
• Rates lowered
• Customs duties
• Presently 16 tariff bands 2006 only 3 tariff
  bands (12, 5 and 0)
• No duties on machinery, equipment and fixed
  assets
• Future custom duties abolished
• VAT refund for machinery, equipment, fixed assets
  and export 1 month Refund of other taxes 3
  months
• 100 amortization on new investmens
• Business registration one-stop shop in 3 days
• Tax disputes settlement within 2 months
• Attractive tax procedure for leasing

7
Customs Reforms

• Simplified custom procedures
• Custom procedures harmonised with European
  Community Customs Code
• Number of documents needed for customs decreased
• Flexible custom procedures both for local
  business and for transit
• Transit no licensing of transporters
• No payments at border check points

8
Financial Sector

• Our motto is not a single financial operation in
  Georgia should be more complicated than in any
  other country
• What we have
• No restriction/taxation of capital repatriation
• No restriction/regulation of foreign currency
  operations
• Insurance market opened for foreign companies
• Next steps
• In general procedures for foreign financial
  companies to open branches will be the same as
  their home countries.
• Simplified procedures for opening branches of
  foreign banks of good reputation (e.g. rating A
  and above)
• Simplified procedures for brokerage companies
  from OECD countries

9
Financial Sector

• 2005 compared to 2004
• Total assets increased by 50
• Total credits increased by 83
• Total deposits increased by 31
• Equity capital increased by 45
• Net profits increased by 125

10
Closing notes

• Government is committed
• To create an optimal macroeconomic environment
• To establish a favourable fiscal framework, with
  low tax burden and simplified procedures
• To introduce free market principles in the
  financial sector
• Achievements are recognised
• In December 2005 Standard and Poors awarded
  Georgia a B sovereign rating, with positive
  outlook.
• I am sure that they also are a sound foundation
  for investments.