The International Monetary Fund (IMF) is urging the National Bank of Georgia (NBG) to impose legal limits on its ability to make discretionary financial transfers to the government, highlighting renewed concerns over the bank’s independence.
In its latest country review, the IMF emphasized that the lack of restrictions on such transfers poses a significant governance risk. According to Mikheil Kukava, CEO of BMG Stemscale, the inclusion of this issue in the IMF’s recommendations signals ongoing doubts about the independence of the central bank.
"The IMF is clearly concerned about the risks to the National Bank's autonomy," Kukava said. "Their recommendation to limit discretionary transfers is a direct response to the increasing potential for political interference."
Kukava explained that discretionary financial transfers are particularly concerning because they lack predefined rules or limitations, allowing the central bank to provide financial resources to the government at its own discretion. This opens the door to potential misuse, especially in situations where political ties compromise institutional independence.
"The term 'discretionary' means the NBG could transfer funds to the government at any time, without clear criteria. That’s what worries the IMF. The risk becomes especially pronounced when the head of the NBG is a former government official, such as a former Minister of Economy. This raises legitimate concerns that the government could pressure the NBG for financial support," Kukava added.
He noted that the IMF had not raised this issue in prior years, as the National Bank had previously maintained a stronger degree of institutional independence. However, in 2023, the IMF suspended a $280 million program with Georgia, citing threats to the NBG’s independence as a core reason.
“This latest warning builds on that previous concern. The IMF is now recommending that such financial transfers be explicitly banned by law to remove any ambiguity and protect the NBG from government pressure,” Kukava explained.
Although the NBG has never actually carried out discretionary financial transfers to the government, the IMF believes that the mere possibility undermines the bank’s credibility. As a safeguard, it is now advocating for legal amendments that would prohibit these transfers outright.
In summary, the IMF’s call for reform reflects growing international unease about the blurred lines between Georgia’s central bank and government institutions, lines that could pose long-term risks to fiscal discipline, investor confidence, and macroeconomic stability.
