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USD 4.55 bln Aid Package Priorities
Civil Georgia, Tbilisi / 23 Oct.'08 / 15:22

38 countries and 15 international organizations pledged to provide USD 4.55 billion to Georgia at the Brussels donors’ conference on October 22.

USD 2 billion is a grant and the rest a low-interest loan. Without counting funding going to the financial sector, pledges amounted to some USD 3.7 billion to meet the urgent post-conflict and priority investment needs of Georgia over the coming three years - 2008, 2009, and 2010.

“This level is even higher then the basic needs outlined in the Joint Needs Assessment (JNA) presented to the conference,” the World Bank and the European Commission, two co-hosts of the conference, said in a press release.

Donor contributions fall into a number of priority areas.

First, there are clearly urgent social needs related to internally displaced people, as well as damaged infrastructure, according to the co-organizers of the donors’ conference. Donors pledged a total USD 450 million to support these immediate needs. 

The joint needs assessment report – or JNA, which was drawn up by the World Bank-led assessment team prior to the conference - estimated that USD 122 million would be needed for social protection, involving USD 70 million for social assistance for newly poor and temporary emergency support for internally displaced persons - GEL 52 (USD 37) per month for 110,000 people for the duration of 6 months and for the 40,000 IDPs for duration of 12 months.

The immediate infrastructure damage-related needs are estimated to USD 61 million, according to the JNA, mostly related to superficial damage to roads resulting from the transport of heavy military vehicles, as well as to loss of aviation radar, and the need to rehabilitate the Tbilisi airport runway.

According to the document direct damage inflicted on the road infrastructure is estimated with USD 18 million; railways – USD 4 million; port – USD 1 million and aviation – USD 38 million.

Second priority targeted by the aid will be “a severe budgetary shortfall, both as a result of the fall in foreign investment as well as the slowdown in economic activity,” according to the Word Bank.

Donors pledged a total of USD 586 million, to offset this budget shortfall. 

JNA estimated that the financing gap in the budget that has emerged shows that budget support required amounts to USD 480 million in 2008 and USD 450 million in 2009.

Revenue shortfalls compared to pre-crisis projections are USD 385 million for 2008 and
USD 640 million for 2009, according to the document. It says that additional shortfalls are expected in privatization receipts.

Third priority is Georgia's banking sector, “which has been particularly hard hit with the fall in investor confidence as well as the overall international financial environment.”

Donors pledged a total of USD 850 million to backstop the commercial banks in Georgia through loans, equity, and guarantees.

“The banking sector has weathered the immediate impact of the conflict, but near-term post-conflict challenges remain,” the needs assessment document reads. “Key banks face external obligations falling due in early, 2009.” According to the sources familiar with the matter, the figure stands at about USD 500 million.

The needs assessment document says that the refinancing needs of the banking sector to roll over liabilities and to provide for support for the moderate growth scenario being supported by the standby arrangement tentatively amounts to about USD 700 million through 2009.

The fourth priority identified by the donors is the need for several “core investments,” particularly in transportation, energy, and municipal infrastructure. Donor financing for “core investments” – as defined in the documents - remains essential as a bridge to the period when the private sector resumes investing.

As a temporary measure to offset the fall in foreign investment in these areas, donors pledged a total of USD 2.65 billion for core investment priorities.

A direct damage and losses inflicted on the energy sector is estimated as USD 12 million by the needs assessment report and core investment needs in the sector is put at USD 205 million.

This figure – USD 205 million - includes cost for the rehabilitation of 220 kilowatt Senaki power transmission line – USD 28 million and a construction of natural gas storage – USD 177 million.

According to the needs assessment report municipal infrastructure will need a total of USD 257 million of core investment. This figure includes some of the areas, which are not related to the covering of damage inflicted directly by the August war. The report, in particular, points out at the need of investments in the Tbilisi, Kutaisi and Batumi urban transport, involving such components as traffic control and management, public transport, parking space and road network.
 
The total contributions pledged at the October 22 Brussels donors’ conference were in addition to the recently approved USD 750 million standby program by the International Monetary Fund (IMF). IMF funds are provided for international reserves and cannot be used for budget or investment purposes. 

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