ADB Provides $100 Million to Maintain, Strengthen Social Services in Georgia

News Release | 21 September 2010

MANILA, PHILIPPINES - In the wake of the global economic crisis and a damaging war in 2008, the Asian Development Bank (ADB) is extending a $100 million loan to Georgia to ensure that government funding for essential social services and protections are maintained and service quality improved.

ADB's Board of Directors today approved the loan for the Social Services Delivery Program. The loan, which is being released following the achievement of key reform milestones by the Government of Georgia, complements an earlier emergency loan of $70 million for post-conflict recovery in 2008, and $80 million in quick-disbursing support in 2009 to mitigate the impacts of the global crisis.

Georgia has been steadily increasing spending on health, education and other key social services, but the global crisis and conflict in August 2008 have weighed heavily on its revenues in the past two years, threatening service sustainability. In addition there are existing gaps in both the quality and quantity of services such as uneven access to primary health care, insufficient health insurance coverage, inadequate public pensions and variable teaching standards. Simulations carried out by the World Bank and United Nations show that without pension payments, poverty levels in the country in 2007 would have been almost 10 percentage points higher than they were, while, without targeted social assistance, poverty would have been two percentage points higher.

The loan helps the government finance essential social service spending by providing a revenue cushion as the economy recovers, while supporting ongoing reforms to improve access, quality and delivery of social protection programs. It also supplements ADB's ongoing and planned projects to promote municipal services, including water supply and sanitation, targeted especially at vulnerable groups.

"The program supports sustainable and inclusive social sector financing, resulting in more effective, efficient, and gender-responsive social services," said Lotte Schou-Zibell, Senior Economist in ADB's Central and West Asia Department.

The government has carried out agreed reform actions to support the program's objectives including implementing administration of a medical insurance program for the poor and adopting a landmark law on gender equality in 2010, which ensures equal access to health care and social assistance without discrimination, as well as providing support for maternity care, family planning and protection of women's reproductive rights. It has also amended the Non-State Pension Insurance and Provision Law to enable private pension funds to diversify their investment options, and in the health sector it has adopted revised minimum service standards for hospitals, outpatient care, and medical laboratories. Vouchers to finance training and improve professional standards for about 12,000 teachers have been disbursed and at least 50,000 textbooks will be provided to school children from families from below the poverty line.

The government has also taken steps to improve transparency and management of public resources for social services to make delivery more effective.

The loan, from ordinary capital resources, has a 15-year term, with a 3-year grace period and an annual interest rate determined in accordance with ADB's LIBOR-based lending facility. The Ministry of Finance is the implementing agency for the program which covers reform actions taken between September 2009 and September 2010.