Page 46 - GEORptMay21

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
Georgia’s National Bank (NBG), citing a rather bleak inflationary outlook generated by overlapping domestic and external factors, on April 28 hiked its refinancing rate by another 1pp, following the 0.5pp added in March, resulting in a hawkish 9.5% rate that is the highest seen for several years.
The reduction of inflation to 2.4% in December was related to the subsidising of utility fees, a move that was of a temporary nature, the NBG argued, pointing to the record 7.2% y/y inflation rate in March, the highest posted since 2011.
Given the changed circumstances since the previous rate-setting meeting, according to the updated forecast, other things being equal, inflation will average around 6.5% in 2021 (versus the 3% target) and then gradually approach the target, NBG says.
At the same time, the monetary authority took steps to address the high dollarisation rate that makes Georgia's banking system vulnerable to exchange rate volatility.
Namely, NBG cut the mandatory reserves ratio for foreign currency liabilities with residual maturities of up to one year to 10% from 25% - but only for banks with a share of forex deposits (a “deposit dollarisation rate”) below 40%. For banks with a deposit dollarisation rate in excess up to 70%, the required reserves ratio remains 25% - while for banks with an intermediary dollarisation rate between 40% and 70% the reserve requirement norm will decrease in a linear fashion from 25% to 10% along with the decrease in the deposit dollarisation.
Georgia’s central bank implied that it was aware of the problems it would create for banks and their debtors with the rate hike, but it must have
46 GEORGIA Country Report May 2021 www.intellinews.com