Annual Report on Exchange Arrangements and Exchange Restrictions 2005


International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2005
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(Position as of December 31, 2004)

Status Under IMF Articles of Agreement
Article VIIIDate of acceptance: December 20, 1996.
Exchange Arrangement
CurrencyThe currency of Georgia is the Georgian lari.
Exchange rate structureUnitary.
Managed floating with no predetermined path for the exchange rateThe National Bank of Georgia (NBG) intervenes in the market mainly to build up official reserves and smooth exchange rate fluctuations. The official exchange rate for the dollar is determined daily. The official rates for other currencies are determined on the basis of the cross rates for the dollar and the currencies concerned in the international market. The official exchange rates are used for budget and tax accounting purposes, as well as for all payments between the government and enterprises and other legal entities. The NBG and the major commercial banks participate in the fixing sessions at the Tbilisi Interbank Currency Exchange for all commercial transactions; the exchange rate of the lari is negotiated freely between the banks and foreign exchange bureaus that are licensed by the NBG and their customers. Foreign exchange bureaus are permitted to buy and sell foreign currency notes.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketThis market is largely inoperative.
Arrangements for Payments and Receipts
Prescription of currency requirements
Controls on the use of domestic currency
For capital transactions
Credit operationsYes.
Use of foreign exchange among residentsAll domestic settlements must be made in lari.
Payments arrangementsNo.
Administration of controlThe NBG is responsible for issuing a single license to perform banking operations in domestic and foreign currencies.
International security restrictionsNo.
Payments arrearsNo.
Controls on trade in gold (coins and/or bullion)A license is required to trade in gold.
Controls on domestic ownership and/or tradeYes.
Controls on external tradeYes.
Controls on exports and imports of banknotesNo controls apply on the amounts that may be exported, but exports of foreign currency must be declared.
On imports
Domestic currencyYes.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyYes.
Held abroadYes.
Accounts in domestic currency held abroadNo.
Accounts in domestic currency convertible into foreign currencyYes.
Nonresident Accounts
Foreign exchange accounts permittedYes.
Domestic currency accountsYes.
Convertible into foreign currencyYes.
Blocked accountsNo.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for imports
Preshipment inspectionYes.
Import licenses and other nontariff measures
Negative listLicenses are required for imports of weapons, narcotics, industrial equipment, medicines, and agricultural pesticides; licenses are issued by the State Committee on Foreign Economic Relations (SCFER).
Other nontariff measuresImported cigarettes are subject to a higher rate of excise tax than domestically produced cigarettes.
Import taxes and/or tariffsThe tariff structure consists of 22 rates ranging from zero to 30%. Items exempt from customs duties include (1) imports related to humanitarian aid and reconstruction in case of natural calamities; (2) imports related to grant agreements; (3) imports under foreign financed projects; (4) imports related to oil and natural gas projects; (5) embassy imports; (6) travelers’ baggage; (7) special food for babies; (8) food, glucometers, and other special articles for diabetics; (9) creative and scientific works of Georgian citizens published abroad; (10) certain pharmaceutical products; (11) special stamps of Georgia; (12) hops; and (13) raw materials and intermediate products destined for production of goods to be exported within certain limits. A customs clearance fee of 0.15% (but not less than lari 50 and not exceeding lari 2,000) of the value of the product is applied to all imports.
State import monopolyn.a.
Exports and Export Proceeds
Repatriation requirementsNo.
Financing requirementsNo.
Documentation requirementsYes.
Export licensesLicensing is administered by the SCFER. Licenses are required for logs; scrap metal; pine seeds; numismatic collections considered national treasures; certain biological, paleontological, archaeological, and ethnographic goods; and raw materials for the production of medicine. Exports of arms and narcotics are subject, in practice, to prohibitions.
Without quotasYes.
Export taxesA customs clearance fee of 0.15% (but not less than lari 50 and not exceeding lari 2,000) of the value of the product is applied to all exports.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersIndicative limits and bona fide tests apply to all payments for invisible transactions and current transfers.
Trade-related payments
Indicative limits/bona fide testYes.
Investment-related payments
Indicative limits/bona fide testYes.
Payments for travel
Indicative limits/bona fide testYes.
Personal payments
Indicative limits/bona fide testYes.
Foreign workers’ wages
Indicative limits/bona fide testYes.
Credit card use abroad
Prior approvalYes.
Indicative limits/bona fide testYes.
Other payments
Indicative limits/bona fide testYes.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsNo.
Restrictions on use of fundsNo.
Capital Transactions
Controls on capital transactionsInward and outward capital operations are not restricted but are subject to registration requirements for monitoring purposes. The issuance, trading, recording, and redemption of government securities are regulated.
Controls on capital and money market instrumentsNo.
Controls on derivatives and other instruments
Purchase locally by nonresidentsYes.
Sale or issue locally by nonresidentsYes.
Sale or issue abroad by residentsYes.
Controls on credit operationsNo.
Controls on direct investmentUnder the Foreign Investment Law, the taxation and promotion of investment activities by joint ventures and foreign enterprises are regulated by the current tax legislation.
Controls on liquidation of direct investmentNo.
Controls on real estate transactionsNo.
Controls on personal capital transactionsNo.
Provisions specific to commercial banks and other credit institutionsThe NBG has set limits on (1) credits issued by commercial banks to an individual borrower, a group of borrowers, an insider borrower, all insider borrowers, and all large borrowers, and (2) unsecured credits; also it has established rules for creating loss provisions for assets (including credits).
Differential treatment of deposit accounts in foreign exchange
Reserve requirementsEffective September 20, 2004, the compulsory reserve requirements are 13% and zero (previously, 13% and 9%) for foreign and domestic currency deposits, respectively. Also effective that date, the reserve requirements are 2% and zero on the average balances of each commercial bank’s correspondent accounts in the NBG in foreign currency and domestic currency, respectively.
Liquid asset requirementsThe NBG has set limits for liquid assets as follows: average monthly liquid assets against average monthly liabilities, liquid assets at the end of the month against liabilities at the end of the month, and current assets with a maturity of up to one month against current liabilities with a payment period of one month.
Open foreign exchange position limitsThe NBG has set a limit on the total open foreign exchange position, defined with respect to the amount of all long foreign exchange positions for all currencies or the amount of all short exchange positions for all currencies, whichever is higher.
On resident assets and liabilitiesYes.
On nonresident assets and liabilitiesYes.
Provisions specific to institutional investorsn.a.
Other controls imposed by securities lawsn.a.
Changes During 2004
Capital transactions
Provisions specific to commercial banks and other credit institutionsSeptember 20. The reserve requirements on the average balances of each commercial bank’s correspondent accounts in the NBG in foreign and domestic currency were set at 2% and zero, respectively. The compulsory reserve requirement for domestic currency deposits was reduced to zero from 9%.

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