Georgia: from Crisis to Stabilization… and Then ?

Abstract

Georgia’s economic course since independence has been tumultuous. During an initial period, the government used the aforementioned directed-credits mechanism in an effort to sustain the pre-independence status quo in production and employment, but brought about hyperinflation and massive financial fragmentation. Once stabilization policies were introduced that reflected the post-independence economic realities of the country, these financial imbalances were gradually righted. With the introduction of a new currency in September 1995, the financial sector developed rapidly and in positive directions. The collapse of Russian financial markets in 1998 had a de-stabilizing effect, however, that the policy-makers faced in a return to crisis