Roman Gotsiridze: “Irakli Kobakhidze agreed to the reform whose previous rejection was amongst the reasons for the suspension of the IMF programme.”

Verdict: FactCheck concludes that Roman Gotsiridze’s statement is MOSTLY TRUE.

The International Monetary Fund’s three-year programme, launched in 2022, was suspended in June 2023 by the Fund itself. The suspension was officially attributed to two main reasons. The first concerned developments at the National Bank of Georgia (NBG), specifically changes to its management structure. The IMF had requested that non-executive members outnumber executive members on the board to ensure stronger oversight. The second reason related to the reform of state-owned enterprises which the IMF had called to be restructured and optimised to mitigate fiscal risks.

Whilst both issues were cited in the official justification, it is likely that the decision to suspend the programme – an extraordinary measure – was primarily driven by the problematic developments at the NBG.[1] The timing of these events closely aligned, reinforcing this interpretation. Nevertheless, the reform of state-owned enterprises remained part of the official explanation. Roman Gotsiridze’s comments specifically address this aspect of the suspension.

The Ministry of Finance approved the Strategy for Comprehensive Reform of State-Owned Enterprises for 2023-2026 shortly after the IMF programme began in 2022. The strategy outlined existing challenges and stressed the urgency of reform. The World Bank and the Asian Development Bank were also actively involved in consultations during the strategy’s development alongside the IMF. However, the government’s subsequent actions and objectives diverged from the agreed-upon framework. This inconsistency ultimately contributed to the IMF citing the delayed reforms as a reason for suspending the programme.

Irakli Kobakhidze expressed a willingness to reform state-owned enterprises two years after the suspension of the programme in June 2025. The IMF’s most recent mission statement for 2025 also acknowledged the positive steps taken by the government, although it noted that some issues still persist.

Therefore, the claim that the government has agreed to carry out a reform – whose delay was amongst the reasons cited for the programme’s suspension – is factually accurate. However, the assertion that the reform was outright rejected at the time is overly categorical and does not accurately reflect the sequence of events leading to its inclusion in the IMF’s official justification. Given the above, FactCheck concludes that Roman Gotsiridze’s statement is MOSTLY TRUE.

Analysis

Roman Gotsiridze, a member of the 10^th convocation of the Parliament, stated on TV Kavkasia: “Kobakhidze somehow agreed to what they had previously refused to do – and because of which, amongst other reasons, the IMF programme was suspended. And the suspension of the programme means reduced investment and the start of something very bad. He has agreed to the reform of state-owned enterprises.”

Mr Gotsiridze’s remarks followed a statement by Irakli Kobakhidze who announced that GEL 52.5 million would be saved through staff optimisation in the railway and energy sectors alone. The total savings from optimisation across all state-owned enterprises, LEPLs and LLCs could exceed GEL 100 million, according to the Prime Minister.

Irakli Kobakhidze made the aforementioned statement following the visit of the IMF mission to Georgia. The IMF mission released a statement after concluding its work, emphasising the need for continued efforts to improve fiscal risk management and transparency: “Sustained efforts are needed to manage fiscal risks and increase fiscal transparency. The authorities have taken significant steps in enhancing the Ministry of Finance’s financial oversight of state-owned enterprises (SOEs) and maintaining this momentum will be important. Efforts should focus on legislation that would separate the state’s shareholder, regulatory and policy functions beyond the energy sector where implementation has recently taken place and strengthen the corporate governance of SOEs. The authorities should address gaps in the coverage of fiscal reporting, particularly from non-market SOEs with significant fiscal risks.”

Georgia joined the International Monetary Fund in 1992. The IMF’s primary mission is to ensure financial stability. Cooperation with the Fund, due to its nature, primarily involves the National Bank of Georgia and the Ministries of Finance and Economy. The IMF implemented several financial support programmes to maintain monetary stability over the years – particularly in the 1990s, after the 2008 war and during the pandemic. The government’s debt to the IMF constitutes USD 166 million whilst the NBG owed USD 362 million as of 31 May 2025. Notably, the IMF remains the NBG’s sole creditor.

The most recent IMF programme was launched in 2022. It included USD 290 million credit facility, designed as a three-year arrangement. Georgia qualified for a USD 40 million credit tranche after successfully completing the first phase but chose not to draw on it, citing higher-than-expected economic growth. The programme was suspended in June 2023 with the situation in state-owned enterprises cited as one of the reasons for the suspension.

The reasons behind the programme’s suspension were also addressed by Andrew Jewell, the IMF’s Resident Representative in Georgia, during a January 2024 interview with the Caucasian Journal where he reiterated the urgent need for reforms.

The suspension – given the IMF’s influence – also damaged the country’s reputation beyond limiting Georgia’s access to credit. Deputy Minister of Finance Giorgi Kakauridze confirmed the presence of heightened risks and threats in 2023.

The IMF’s 2024 review noted that the reform of state-owned enterprises remains delayed, increasing fiscal risks and undermining the economy’s efficiency.

The IMF underlines that Georgia’s SOEs carry significant fiscal risks and suffer from a lack of transparency. Many are inefficient, fail to meet commercial objectives and often operate without sufficient oversight. The IMF urges the Georgian government to develop a clear SOE reform strategy, establish strong corporate governance standards, regularly publish financial statements and reduce government interference in commercial operations.

The 2024 review also highlights that the government’s draft law on SOEs does not align with the reform strategy agreed upon with the IMF team.

The IMF emphasised that the law must grant the Ministry of Finance adequate authority to monitor and manage fiscal risks.

There must be a clear separation between the state’s roles as a shareholder, regulator and policymaker to prevent conflicts of interest, according to the IMF’s recommendation. The Fund also calls for intensified efforts to reduce the state’s role in the economy.

The issues highlighted by the IMF are supported by statistics. SOEs in Georgia frequently operate at a loss – these enterprises reported a combined loss of GEL 235 million in 2023 alone. The period from 2013 to 2019 was also marked by unprofitability. State-owned companies accumulated total losses of GEL 2.7 billion between 2013 and 2023 – excluding the years 2020 and 2021, the losses still amounted to GEL 2.1 billion.

Graph 1: Net Profit of State-Owned Enterprises (GEL Million)

Source: Ministry of Finance of Georgia

Whilst the main causes for losses amongst SOEs have included currency fluctuations and asset depreciation at various times, other systemic issues have also contributed, such as subsidies, inflated staff levels and poor expense optimisation.

The highest loss-making entity in 2023 was the United Water Supply Company of Georgia, ending the year with a loss of GEL 407 million.

The largest annual loss before the pandemic occurred in 2018 when SOEs recorded a combined loss of GEL 816 million – that year, Georgian Railways alone experienced a loss of GEL 717 million, although this figure was driven not by operational losses but by asset write-offs.

The Ministry of Finance developed a comprehensive reform strategy for SOEs for the period 2023-2026 in 2022. The introduction to the document notes that the strategy was prepared with active support from international partner organisations and outlines five main reform directions that define the state’s vision over a four-year development perspective. Before outlining future plans, the strategy highlights that 245 SOEs have been liquidated thorough court proceedings since 2013 due to bankruptcy with outstanding debts to creditors totalling GEL 930 million.

Despite some progress, the document acknowledges that challenges persist, including unsatisfactory financial performance, weak corporate governance and lack of transparency. It also identifies the fragmentation of regulatory norms across various legislative acts as an additional problem.

Despite nearly GEL 1.6 billion in subsidy-based capital investments between 2015 and 2021, the capital of SOEs continued to decline, according to the document. This was attributed to asset depreciation and sustained losses.

The strategy outlines five key reform directions and corresponding measures:

1. Corporate Governance – All state-owned corporations will be required to establish supervisory boards, regardless of their legal form. The analysis found that many enterprises currently lack such boards and, where they do exist, their independence is often questionable.
2. Commercial Goals – SOEs are expected to deliver financial results comparable to those of private commercial companies.
3. Competitive Neutrality – The state will adopt a neutral stance, ensuring that SOEs neither benefit from unfair advantages nor face disadvantages.
4. Ownership Policy – In addition to the Ministry of Economy, the Ministry of Finance will take on a greater role in the management of SOEs.
5. Strategic Management – State-owned companies will be required to submit annual corporate governance statements.

Andrew Jewell noted in an interview with Business Media that the changes outlined in the strategy were not reflected in the draft law.

“We had an extensive dialogue on how these objectives can be achieved. A reform strategy was adopted by the government in December 2022 and both the IMF and the World Bank actively participated in its development. The next step is to adopt legislation that aligns with and implements this strategy. We have reviewed the draft law and believe it does not reflect the strategy we helped shape. It seems the government now has reservations about some of the commitments it made in the strategic document. As a result, we are currently working together to explore alternative ways to achieve the same objectives. Those objectives include improving efficiency in the sector and ensuring the Ministry of Finance has the authority to exercise financial oversight of state-owned enterprises.

There are also ongoing discussions about ownership. Currently, state-owned enterprises fall under the Ministry of Economy but the strategy envisioned shared ownership between the Ministry of Finance and the Ministry of Economy. However, the Ministry of Economy has indicated that this may not be the most acceptable solution for them. Therefore, we are open to exploring and evaluating other options.

The draft law has not yet been submitted to Parliament and currently exists as a working document. We need to see in what form it will ultimately be presented to Parliament and how the issues outlined in the strategy will be reflected in the final version,” said Andrew Jewell.

Minister of Economy Levan Davitashvili also acknowledged the need for reform in January 2024, although he stated that the restoration of the IMF programme did not depend on the reform of SOEs.

The situation can be summarised as follows as of June 2025: the government, in coordination with the IMF and other international financial institutions, developed a reform strategy but only partially implemented its provisions. Considering that the Georgian Dream has taken some steps toward the reform over the past two years but has not fully addressed the IMF’s recommendations or succeeded in restoring the programme, FactCheck concludes that Roman Gotsiridze’s statement is MOSTLY TRUE.