1. The following information has become available since the issuance of the staff report. These developments do not the change the thrust of the staff appraisal.
2. Estimated real GDP growth for 2005 has been revised upward to 9.3 percent, reflecting both a stronger than expected 2005 performance and a modest downward revision of 2004 GDP. Inflation in the twelve months that ended in February fell further to 5.1 percent of GDP.
3. The authorities appear to be on track to meet the indicative quantitative targets and performance criteria for end-March. Fiscal and monetary performance through end-February was well in line with program targets.
4. A Memorandum of Understanding between the Ministry of Finance and National Bank of Georgia has been signed. The agreement includes a securitization schedule for the non-marketable government debt held by the NBG, thereby creating more instruments of monetary policy. In addition, legislation to eliminate commercial bank ownership restrictions was passed by parliament, and amendments to prohibit government borrowing from the NBG were submitted to parliament.
5. The authorities’ trade liberalization strategy is being discussed in parliament. However, the three-year plan reported in the staff report has faced objections. As a result, the authorities now plan to pass the trade reform in three stages. In the first stage, the highest tariff rate of 30 percent would be reduced to 12 percent, and the number of import tariff bands would be reduced from sixteen to three (at 0, 5 and 12 percent), as had been discussed in EBS/06/40.
6. The authorities are making good progress toward establishing and populating the LEPL database, and appear to be on track to meet the related end-March structural performance criterion.