Page 48 - GEORptApr21

ADB lends $3.7mn to Georgia’s Credo Bank for on-lending as farm loans
The Asian Development Bank (ADB) has signed a Georgian lari (GEL) 12.3mn ($3.7mn) loan agreement with Credo Bank. Under the agreement, three-year financing denominated in local currency will be used to extend loans to low-income farms and women entrepreneurs of micro, small and medium sized enterprises (MSMEs).
The financing is aimed at helping recipients successfully manage challenges posed by the COVID-19 pandemic.
Including previous deals, the ADB has so far provided a total of GEL74mn in financial and technical assistance to Credo Bank and its customers.
"I am pleased that another strategically important transaction has taken place with a long-time partner, the Asian Development Bank. The resource is intended for farmers to facilitate the production of the upcoming spring works,'' said Credo Bank general director Zaza Pirtskhelava.
"Credo Bank will significantly mitigate the negative economic impact of the COVID-19 pandemic in the regions of Georgia by supporting the activities of micro and small agricultural enterprises and women entrepreneurs. This resource will significantly contribute to the smooth running of farms and enable them to continue to contribute to the country's food supply," said Christine Engstrom, ADB's private sector director.
8.2 Central Bank policy rate
Gerogia’s central bank hikes key rate citing imported inflation, high dollarisation
The National Bank of Georgia (NBG) hiked its key rate, the refinancing rate, at its March 17 monetary policy board meeting by 50bp to 8.5%, explaining that low inflation (3.6% y/y in February) was only a transient effect of energy price subsidisation.
Georgia entered the coronavirus crisis with a hawkish refinancing rate of 9% at the end of 2019. At the time, the monetary authority was fighting pressure on the local currency and related rising inflationary expectations. It cut the rate during 2020 while supplying foreign exchange sufficient to moderate concerns related to the exchange rate and its inflationary impact.
Now, Georgia’s central bank, in explaining its monetary policy tightening, is citing risks of imported inflation and high dollarisation that facilitates the strong pass-through of exchange rate variations to consumer prices. Supply-side inflationary pressures stemming from lower domestic output are also mentioned.
Price increase trends on international commodity markets, which have especially accelerated since the beginning of the year, are noteworthy among the factors affecting the dynamics of inflation, the central bank said.
The NBG also took into account the persistence of the depreciated local currency, given that the high dollarisation of the economy is another factor that is pushing inflation upwards.
At the same time, on the back of reduced output due to the pandemic, average production costs are higher. This is another source of the upward pressure on inflation.
According to the current forecasting, other things being equal, the NBG expects inflation to remain around 4%-4.5% in 2021 and then gradually approach the 5% target.
48 GEORGIA Country Report April 2021 www.intellinews.com