09TBILISI292, GEORGIA: NEW PM EXPRESSES CONCERN RE ECONOMY, REITERATES

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Reference ID Created Released Classification Origin
09TBILISI292 2009-02-11 13:25 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Tbilisi

VZCZCXRO8501
RR RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHNP RUEHPOD RUEHROV RUEHSK RUEHSR RUEHVK RUEHYG
DE RUEHSI #0292 0421325
ZNR UUUUU ZZH
R 111325Z FEB 09
FM AMEMBASSY TBILISI
TO RUEHC/SECSTATE WASHDC 0928
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE

UNCLAS TBILISI 000292 
 
SENSITIVE 
 
SIPDIS 
 
DEPT FOR EUR/CARC AND EUR/ACE 
 
E.O. 12958: N/A 
TAGS: PREL PGOV GG
SUBJECT: GEORGIA: NEW PM EXPRESSES CONCERN RE ECONOMY, REITERATES 
INTEREST IN BUDGET SUPPORT AND CONSIDERS U.S. VISIT 
 
1.  (SBU)  In his first official meeting since being confirmed as 
Prime Minister, Nika Gilauri told the Charge and AID Mission 
Director February 9 that he was very concerned about the state of 
the Georgian economy and outlined a series of initiatives aimed at 
garnering more budget and balance of payments support, as well as 
bolstering investor confidence.  He stated that an early trip to the 
U.S. was among his highest foreign policy priorities.  During the 
trip, he hoped to meet new administration officials and advocate for 
more USG support for these initiatives.  Gilauri noted that, in 
spite of the global economic crisis, there were investors out there 
and he was determined to do everything possible to make Georgia an 
attractive place to invest. 
 
2.  (SBU)  Gilauri said that January revenue inflows were worrying. 
Although the Government had taken in slightly more lari than 
expected, this good result had been artificial since the Central 
Bank had stayed open on the last day of the month, January 31, which 
was a Saturday, in order to ensure that revenue would be higher.  He 
noted that the Government had spent a good deal of money in 
November, and the economy had responded positively; in December, the 
Government had spent less and the economy had not done as well. 
 
3.  (SBU)  With regard to initiatives, more budget support from the 
U.S. was the first item on the PM's list.  The PM noted how critical 
the $250 million in budget support provided in the fall had been and 
urged us to consider providing the approximately $250 million 
remaining from the $1.0 billion pledge made by the U.S. at the 
October 22 Donors Conference in Brussels to the Government in the 
form of direct budget support to cover anticipated future budget 
shortfalls.  He stated that budget support was essential due to the 
disappointing revenue collection numbers for January - a trend he 
expects will continue.  The PM argued that direct budget support 
would have the added benefit of making additional foreign exchange 
available for importers.  The Charge noted that the USG's provision 
of $250 million in budget support had been an extraordinary measure, 
but that we would convey the PM's request to Washington. 
 
4. (SBU)  In light of the continuing decline in foreign direct 
investment inflows, the PM requested consideration of a currency 
swap that would replenish dollar reserves in exchange for Georgia 
Lari, and further improve Georgia's capacity to finance imports.  He 
noted that the U.S. had recently engaged in such a swap with 
Mexico. 
 
5.  (SBU)  With respect to bolstering investor confidence, PM 
Gilauri stated that a free trade agreement was still very much in 
the interest of his government, and it would increase Georgia's 
attractiveness for companies interested in investing.  He asked that 
the USG consider supporting the establishment of a Georgian state 
insurance agency that would provide political risk insurance to 
foreign investors.  The PM explained that the most meaningful way of 
support would be to align this Georgian agency with OPIC, although 
he underscored that insurance costs would be borne by foreign 
investors.  Lastly, he requested USG assistance to ensure that 
Georgia receives the full measure of financial support pledged to it 
by all donors at the Brussels conference.  This financial support 
was essential for economic and political stability.  Gilauri 
confided that he was concerned that a rumored World Bank retreat 
from its pledge that could cause other donors to delay their 
respective pledges. 
 
6.  (SBU)  Comment.  PM Gilauri appears to be focused on continuing 
Q6.  (SBU)  Comment.  PM Gilauri appears to be focused on continuing 
the work of his predecessor once removed, Lado Gurgenidze, in 
focusing on Georgia's economic situation and attracting new 
investors.  As the longest serving member of the Cabinet since the 
Rose Revolution (Gilauri was Minister of Energy, 2004-2007, and 
Minister of Finance from 2007 to the present), Gilauri is eager to 
use the Prime Minister's post to coordinate and direct the 
Government's work rather than setting up a parallel economic 
development council.  As a first step toward restoring authorities 
to the line ministries, Gilauri had dismissed the head of the State 
Chancellery, Kakha Bendukidze, who has been a powerful economic 
force within the PM's office.  According to Gilauri, the new head of 
the State Chancellery will be an administrator who will worry only 
about buying paper for the offices and putting gas in the vehicles. 
The PM has set up three new senior advisor positions charged with 
overseeing international relations, domestic issues and legal issues 
(an in-house L for the PM's office).  During our meeting, Gilauri 
was accompanied by his new senior advisor for international 
relations, former Deputy Minister of Economic Development Tamara 
Kovziridze.

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