Koba Gvenetadze, Governor of the National Bank of Georgia, participated in the International Forum on Economic and Financial Stability. The event was organized by the Central Asia Regional Economic Cooperation (CAREC), the International Monetary Fund (IMF), the World Bank (WB) and the Asian Development Bank (ADB). The high-level forum was devoted to discussing social spending and growing social inequality post-COVID.

 

The event was attended by the Ministers of Finance, Economy, Social Security and Education of various countries, as well as representatives of the World Bank, the International Monetary Fund and the Asian Development Bank. Governor Gvenetadze was one of the speakers at the forum. The session was moderated by William Seitz, Senior Economist and team leader for the Poverty and Equity Global Practice of the World Bank in Central Asia. The speakers discussed the social and economic impacts of the COVID-19 pandemic, the costs of healthcare and social assistance to ensure macroeconomic stability.

 

 

“A coordinated policy of fiscal and monetary authorities is vital to mitigate the negative impact of COVID-19 on the economy and vulnerable part of the society. The National Bank of Georgia has taken significant steps to mitigate the negative impact of the COVID-19 pandemic on the country’s financial sector and to stimulate the national economy. In the short run, well-targeted fiscal stimulus to address some of the most acute pandemic-related problems will allow the monetary policy to further support the recovery in the medium term - after neutralizing any substantial inflationary pressures. Such a collaborative mix of the two policies is believed to safely contribute to the recovery of the economy and help alleviate the inequality problem in the post-pandemic era. Central banks contribute to reduce inequality by also maintaining financial stability. As a clear illustration, in Georgia, over the years, household debt was increasing and there was a tendency that this debt was mostly taken by households that had already devoted large parts of their income to debt servicing. This was creating high pressure on low-income households. Meanwhile, those loans were risky and interest rates were high. Thus, before the pandemic, we started to introduce responsible financing regulations to mitigate over-indebtedness risks. This reduced the vulnerability of households during the crisis and significantly mitigated the threats to financial stability, "- Governor Gvenetadze stated.