The World Bank
Second Green and Resilient Georgia Development Policy Operation (P179972)
Program Information Document
(PID)
Concept Stage | Date Prepared/Updated: 09-Nov-2023| Report No: PIDC37008
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The World Bank
Second Green and Resilient Georgia Development Policy Operation (P179972)
BASIC INFORMATION
A. Basic Project Data OPS TABLE
Country Project ID Project Name Parent Project ID (if any)
Georgia P179972 Second Green and Resilient P177797
Georgia Development
Policy Operation (P179972)
Region Estimated Board Date Practice Area (Lead) Financing Instrument
EUROPE AND CENTRAL ASIA Mar 12, 2024 Macroeconomics, Trade Development Policy
and Investment Financing
Borrower(s) Implementing Agency
Georgia National Bank of Georgia, Ministry of Economy and Sustainable Development, Ministry
of Environmental Protection and Agriculture, Ministry of Finance
Proposed Development Objective(s)
To support Georgia enact key policy reforms targeted at a green and resilient development, including by meeting
climate commitments, protecting natural assets, and improving the efficiency of key markets.
Financing (in US$, Millions)
FIN_SUMM_PUB_TBL
SUMMARY
Total Financing 50.00
DETAILS -NewFin3
Total World Bank Group Financing 50.00
World Bank Lending 50.00
Decision
The review did authorize the preparation to continue
B. Introduction and Context
Country Context
1. Economic growth has remained robust, despite shocks, although there remain several structural constraints.
Between 2016-22, Georgia maintained an average per capita growth rate of 4.5 percent. As the COVID-19 pandemic hit,
Georgia experienced one of the largest GDP drops in ECA. Growth recovered to double digits in 2021 and 2022, supported
by large inflows of money transfers and people in the aftermath of Russia’s invasion of Ukraine, as well as improved
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The World Bank
Second Green and Resilient Georgia Development Policy Operation (P179972)
tourism sector performance. Over the past decade, the poverty rate (measured using the national poverty line) was nearly
halved, declining from 37.3 percent in 2010 to 15.6 percent in 2022. However, the recent World Bank Systematic Country
Diagnostic Update identifies a series of challenges to sustain strong, green and inclusive growth. Total factor productivity
at the firm level has stagnated in the past decade, limited in part by challenges in access to finance. In terms of
sustainability, Georgia has so far been unable to decouple carbon emissions from economic growth. This DPO series tries
to address some of these key priorities including the need to reduce emissions from the transportation sector and improve
energy efficiency, to improve SOE corporate governance, improve access to and management of water, expand payment
options and ensure interoperability and non-discriminative access to finance.
2. The macroeconomic climate is adequate and overall risks to the operation are assessed as moderate. None of
the envisaged risks are expected to undermine the likelihood that the operation will achieve its intended results. Top
macroeconomic risks include the heightened uncertainty due to spillovers from Russia’s invasion of Ukraine. Nonetheless,
Georgia’s overall track record of sound macroeconomic management, coupled with healthy buffers, can mitigate these
risks. In addition, the reforms supported by this operation are expected to increase the resilience of economic growth and
mitigate fiscal risks.
Relationship to CPF
3. The Development Policy Operation (DPO) contributes to the pillar on resilience which is highlighted in the
Country Partnership Framework (CPF) for FY19-FY22,1 as updated by the 2022 Performance and Learning Review.2 The
CPF reflects new economic and social challenges posed by the COVID-19 pandemic, as well as the increased focus on green
and resilient development. Specifically, prior actions under this operation contribute to CPF focus Area 3 (Resilience). For
example, improving the monitoring of forest integrity helps to preserve Georgia´s natural capital, consistent with CPF
Objective 3.3 on enhanced management of natural resources and climate risks. Actions under Pillar 2 contribute to CPF
objective 3.1 on improving macro-fiscal management and mitigating risks. Finally, Pillar 3 of the DPO, which aims to
improve access to and management of water, contributes both to improving resilience and to CPF Objective 1.1 on access
to markets.
C. Proposed Development Objective(s)
To support Georgia enact key policy reforms targeted at a green and resilient development, including by meeting
climate commitments, protecting natural assets, and improving the efficiency of key markets.
Key Results
4. Greening economic activity, mitigating fiscal risks and building institutional capacity will enable Georgia to meet
its development objectives while meeting EU and international obligations. Specifically, the enforcement of the
emissions and air pollution regulation will reduce air pollution and improve air quality and reduce health impacts through
a gradual improvement of the stock of cars in Georgia. Introducing climate change and gender tagging in Public Finance
Management will allow the government to better understand and strengthen the contribution of public funding and
projects to climate mitigation and adaptation as well as gender imbalances. Amending the Corporate Governance Code
for banks will lead to a more accurate tracking of progress on climate commitments and help foster finance for green
and climate agendas. Amending the laws on energy efficiency will raise the ambition level of Georgia’s legally binding
energy efficiency targets and provide the government with means to achieve these targets. The new Law on State-Owned
1 Report No. 121853-GE, discussed at the Board on May 22, 2018.
2 Report No. 166148-GE, dated April 14, 2022.
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The World Bank
Second Green and Resilient Georgia Development Policy Operation (P179972)
Enterprises will establish clear accountability lines between SOEs and the government as their shareholder, enabling
stronger SOE oversight, including over SOEs’ financial performance. Implementation of the Law on Water Resource
Management is expected to ensure equitable supply of water resources to its multiple users, reduce water pollution and
gradually improve its quality.
D. Concept Description
5. This DPO is structured along 3 pillars. Pillar 1 on greening economic activity will facilitate Georgia’s transition to
decoupling emissions from growth by reducing the harmful environmental footprint of economic activity, achieving its
agreed NDC targets and enhancing climate disaster resilience, all in alignment with EU and international obligations.
Reforms supported will likely include adopting a decree introducing the EU standards for permissible automobile
emissions to Georgia aimed at cutting pollution with harmful substances and GHGs, and decreasing the associated public
health impacts; amending the Public Investment Management Decree and Charter framework to include aspects of
mitigation and adaptation; amending the Corporate Governance Code for banks requiring them to reflect ESG risks in their
strategy; amending laws on energy efficiency to substantially raise the ambition level of Georgia’s legally binding energy
efficiency targets and provide the government with means to achieve these targets; and, strengthening the Law on
Biodiversity to increase conservation efforts. Pillar 2 on mitigating fiscal risks will focus on increasing resilience stemming
from SOEs. Reforms supported will likely include introducing SOE governance arrangements in line with good international
practice. Pillar 3 on improving access to and management of services such as water and finances will support reforms to
ensure an equitable distribution of water and expand payment options and ensure interoperability and non-discriminative
access to finance.
E. Poverty and Social Impacts, and Environmental, Forests, and Other Natural Resource Aspects
Poverty and Social Impacts
6. Overall, the policy agenda supported by this DPO is expected to yield positive impacts on the economy, poor
and the vulnerable in the medium- to long-term. Majority of the policy actions are expected to indirectly bolster the
resilience of poor and vulnerable households and contribute to poverty reduction. Greening economy activities of the
government such as introducing the EU standards for permissible automobile emissions to Georgia and on the Public
Finance Management (PFM) side, assigning more weight to climate mitigation and adaptation aspects in project design
and selection are expected to have a neutral impact in the short term but lead to positive poverty and social outcomes in
the longer term. In the longer term, the poverty and social impact is anticipated to be positive, through the diminution of
the poor's exposure to air pollution and contributions to climate change mitigation. These actions will also have a welfare-
enhancing impact in the medium- to long- term, albeit possibly involving transition costs. Energy-efficient technologies
and practices reduce the energy required for heating, cooling, and powering residences, translating into reduced energy
costs – highly beneficial for the poor. Mitigating macroeconomic and fiscal risks through the SOE reform strategy and the
SOE framework law, is expected to have neutral to positive impacts on poverty reduction and shared prosperity. The poor
and vulnerable would benefit both from improved service delivery as well as, potentially, larger room for resources to be
devoted to social spending. Regulations on Payment Systems and Payment Services are expected to positively contribute
to poverty reduction and inclusive growth by generating opportunities and improving access to financial resources,
although short-term negative impacts are possible. Research indicates that higher mobile money transactions can reduce
poverty levels through multiple channels, including jobs creation for agents, facilitating money transfers, and formalizing
rural banking within the overall economy. In addition, reforms that reduce flooding and drought through better water
management will improve living conditions and reduce vulnerability of communities in high-risk areas to natural disasters,
including those that are exacerbated by climate change and also improve access to clean water.
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The World Bank
Second Green and Resilient Georgia Development Policy Operation (P179972)
Environmental, Forests, and Other Natural Resource Aspects
7. The operation features many actions that are expected to have positive effects, as they directly address climate
change mitigation and adaptation aspects, as well as environmental protection. New regulations on the maximum
permitted concentrations of target pollutants in automobile exhausts will lead to a gradual rejuvenation of the automobile
fleet and is expected to reduce air pollution and improve air quality and reduce health impacts from pollution. To maximize
climate co-benefits, climate-informed public investment management is a powerful tool for the State budget funded
programs. Mainstreaming environmental, social, and governance risk management in banking sector will enhance
resilience of bank portfolios as well as foster preference to environmentally and socially beneficial financing decisions.
Amendments to Georgia's energy efficiency laws are expected to result in tangible energy savings directly linked to the
preservation of natural resources and decrease in carbon emissions. The draft law on biodiversity serves to preserve
Georgia’s natural capital, protection of habitats, conservation and sustainable use of flora and fauna, as well as
enhancement of ecosystem service delivery for better livelihood of people. Policy actions that aim at mitigating
macroeconomic and fiscal risks through the SOE reform and the SOE framework law are environmentally neutral whereas
government efforts to improve institutional capacity for better access to water resources could have a positive impact on
the environment. Specifically, the recently adopted water resource management law is expected to have a positive impact
on the environment, while regulations on payment systems is expected to have no environmental footprint.
.
CONTACT POINT
World Bank
Cindy Audiguier, Joern Thorsten Huenteler, Mariam Dolidze
Senior Economist
Borrower/Client/Recipient
Georgia
Ekaterine Guntsadze
Deputy Minister of Finance
e.guntsadze@mof.ge
Implementing Agencies
Ministry of Economy and Sustainable Development
Romeo Mikautadze
Deputy Minister
ministry@moes.gov.ge
Ministry of Environmental Protection and Agriculture
Nino Tandilashvili
Deputy Minister
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The World Bank
Second Green and Resilient Georgia Development Policy Operation (P179972)
info@mepa.gov.ge
Ministry of Finance
Ekaterine Guntsadze
Deputy Minister
e.guntsadze@mof.ge
National Bank of Georgia
Papuna Lezhava
Vice-Governor
info@nbg.gov.ge
FOR MORE INFORMATION CONTACT
The World Bank
1818 H Street, NW
Washington, D.C. 20433
Telephone: (202) 473-1000
Web: http://www.worldbank.org/projects
APPROVAL
Task Team Leader(s): Cindy Audiguier, Joern Thorsten Huenteler, Mariam Dolidze
Approved By
APPROVALTBL
Country Director: Rolande Simone Pryce 20-Nov-2023
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