The Parliament heard the Annual Report by the National Bank for 2018

27 Jun 2019
The Parliament heard the Annual Report by the National Bank for 2018

The Parliament heard the Annual Report by the National Bank for 2018 introduced by the NB President, Koba Gvenetadze.

The report overviews the monetary-credit, currency and supervision policy and audited financial settlement. “The primary task of the National Bank is to ensure price stability, which means maintenance of inflation at 3% for the mid-term run. In this view, the Bank applies inflation targeting as the modern and best practice for the monetary policy. It allows maintenance of price stability in the mid-term period”, - he noted.

Georgia, similar to other open economies, encounters inevitable shocks independent from monetary policy. “Monetary policy is to affect the demand and thus, central banks respond to the demand shocks as supply shocks are related to high expenditures and may entail economic growth fluctuation and reduced employment. Based on the surveys, impact of the monetary policy changes to the economy takes time. Hence, it’s expedient to admit deviation from inflation target index in short term if the mid-term forecasted inflation returns to the target index and if this shock increases inflation expectations and forecast. Then, the National Bank respectively changes the policy”.

The supergene factors in 2017 have significantly affected the inflation rate.

In 2018, impact of the increased tobacco and fuel excise fees on influence has been expired. One of the priorities of the NB envisages GEL increase as the part of the long-term economic policy.

In this regards, in 2018 the National Bank has made significant steps – in view of encouragement of extra fund raise in June, 2018, the minimal reserve norm on GEL raised funds reduced from 7 to 5%; In July, 2019 the Monetary Policy Committee has made the decision to increase of the reserve demand to 25% instead of 20%”.

De-dollarization tendency in 2017 continued in 2018 affecting the loans to the natural persons and legal entities. Though, later the tendency has slowed down.

It was related to excessive foreign currency resources in the bank sector allowing the banks offering lower-interest loans to the market. In total, dollarization of the loans in 2018 excluding the exchange rate effect, reduced with 0.8% constituting 56.8% in December, and the deposit dollarization rate in 2018 reduced with 3.2% constituting 63.1%”.

2018 was important for foreign sector activity, export incomes, tourist revenues and money transfers. In 2018, the NB kept filling the international reserves.

Adequate level of the international reserves to the foreign shocks indicates to economic sustainability, especially in high dollarization countries like Georgia, and is the integral part of macro-economic stability provision. For years, the National Bank investments were directed to procurements solely and the total procurement constituted 197.5 ml USD. At that, the National Bank acquires foreign currency only when the exchange rate is solid”.

The reporter noted that for 2018, the NB in cooperation with the financial sector, worked on development of the responsible crediting framework. “We have developed the provision on crediting for the natural person based on the responsible crediting principles and implying application of the standards allowing the debtor using the loan without the financial complications. It required mandatory analysis of solvency of the debtor envisaging scrutiny of incomes, expenses and liabilities”.

He underlined that efforts of the international rating companies for maintenance of stable macro-economic and financial environment were reflected on improvement of the credit ratings of Georgia. “Improvement of the rating enhances trust of the international institutions and investors to Georgia”.

Significant steps have been made for capital market development and supervision policy. In 2018, the bond market has been intensified – bonds of 714 ml GEL were emitted by the international financial organizations and corporate sector – exceeding previous index with 49%.

And at last, let me state that the National Bank has repeatedly awarded evidencing correctness of our policy and priorities. Based on the efforts for financial education of the population, the National Bank was awarded in the “Regional Country Award” category at the Global Inclusion Awards in 2018 held since 2012. The World leading financial magazine Global Finance named the National Bank President amongst the best administrators of the central banks”.

The reporter answered the questions.

The Chair of the Budget and Finance Committee, Irakli Kovzanadze assumed the floor: “National Bank, first of all, enjoys high international reputation evidenced with the visit of the IMF CEO to Georgia and her support to the National Bank and the Government, as well as the nomination of the President of the National Bank by the Global Finance amongst the best administrators.

However, let me cite the IMF CEO that we shall not be tired of the reforms. The National Bank and its administration shall ensure timely and adequate response to the challenges which are increasing as we witness in the tourist sector, as well as the challenges related to USD”.

The Committee discussed the NB report and approved it.

MPs, with 80 votes, approved the draft resolution on Endorsement of the Annual Report of the National Bank on Monetary-Credit, Currency and Supervision Policy for 2018.

MPs discussed the annual report of state budget execution for 2018 introduced by the Deputy Finance Minister, Giorgi Kakauridze, speaking about the main parameters of the budget. Budget 2018 was planned on 4.5% economic growth, though the index appeared higher in the first half of 2018, and lower in the second half.

Annual economic growth constituted 4.7%. Foreign trade index constituted 12 473 ml USD – exceeding the previous index with 17%. Export share was 3 355 ml USD – 22.6% higher; and import share was 9 118 ml USD – 14.9% higher. EU is the largest export and import partner.

Tourism incomes increased with 19% constituting 3 222 ml USD. Money transfer index increased with 15% and constituted 1 350 ml USD. Mixed budget was exercised with 101% and constituted 10 506 ml GEL. 8.8% of GDP was directed to the capital expenditures constituting 3.6 bl. GEL. All categories of the budget are executed.

Payment index was executed with 100.1% - 9 696 ml GEL. Grants constituted 404 ml GEL – 119% execution, and other revenues were executed with 114% - 495 ml GEL”.

983.6 ml GEL was consumed on foreign debts and 279.3 ml GEL for domestic debts. Expenditure part constituted 12 590 ml GEL – 100.8% of the planned amount.

MPs approved the report with 78 votes.

The Parliament heard the report by the Energy and Water Supply Commission for 2018 introduced by the Chair, Irina Milorava.

MPs took note of the report. MPs, with accelerated consideration, discussed with the I reading the bill on State Inspector Service defining the effective date as November 1, 2019.

According to the Chair of the Legal Committee, Anri Okhanashvili, the previous changed extended effective date from January 1 to July 1, though the Personal Data Inspector has been soon transferred into the State Inspector retitling the Service as well. “As you know, we elected the new Chief of the State Inspector with two main functions: personal data protection and control; investigation of the offenses committed by the law-enforcement agencies. These are related to financial provision to be enacted on July 1 but uninterrupted operation of the Service requires respective organizational-technical provision – premise, allocations, equipment and trainings for investigators. As the Government has not allocated the funds yet, we need to extend effective day, otherwise we will encounter the fact that the law is effective but the Service will have no office, no investigators and equipment”.

MPs approved the bill with 81 votes and discussed with the I reading the bill on Code of Administrative Offenses introduced by the Chair of the Defense and Security Committee, Irakli Sesiashvili.

The bill envisages administrative responsibility for distribution, printing, using, import, transportation or export of the electronic or printed maps with violated territorial integrity. The violation entails penalty of 100 GEL for the natural person and 150 GEL for the legal entity.

MPs approved the bill with 82 votes and discussed the report by the Defense and Security Committee and took the note of it.

MPs discussed with the I reading and approved with 86 votes the bill on Tax Code introduced by Mamuka Mdinaradze.

The sports vehicle is the only sports inventory taxed with the excise and without the change, no sports vehicles will be left in Georgia in 2-3 years. “Hence, after consulting the respective Federations, we made the decision to exempt the holder of the vehicle from the excise fee importing the vehicle, transferring it into the sports car, acquiring the respective certificate/conclusion by the Federation to submit it to the respective agencies”.

The change envisages the excise fee as 100 GEL for sports car indicated in 8705 commodity position of the Code. MPs discussed with the I reading the bill on Motor Transport. The change supplements paragraph 1, Article 3 with paragraph 11 defining the concept: mechanical vehicle converted in line with the requirements of the International Motor Federation and Motor Sports Federation of Georgia; status of the vehicle is evidenced with the certificate issued by the Federation. MPs adopted the bill with 82 votes.

Today, the Parliament:

  • Approved with the I reading and with 86 votes the bill on IDPs from the Occupied Territories of Georgia changing the term for termination of the IDP allowance due to absence in the country. Allowance shall be terminated if the IDP leaves the country for more than 3 months instead of 2. The bill is initiated by Ada Marshania;
  • Approved with the III reading and with 80 votes the bill on Budget Code adding the norm on mandatory development of the draft state budget so to ensure education system financing according to the mixed budget functional classification no less than 6% of GDP.

The next session starts tomorrow at 12h00.