Central Bank Independence in Transition Economies

4C. Limitations on Lending 

The State account in the National Bank may not be overdrawn. The Bank can  

grant short term credit to the State through the purchase of the Government securities. 

The amount of the credit is limited to 5% of the budget revenues in the previous year, 

its maturity is limited to three months (Art. 30)

5

. The maturity of the Government 

securities purchased on the secondary market is limited to one year (Art. 28). 

4D. Banking Supervision and Exchange Rate Policy 

The CNB is responsible for commercial banks supervision (Art. 44-46) and 

determines the exchange rate (Art. 35). 

 

5. Georgia

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The National Bank of Georgia (NBG) was established in 1991 from regional 

branch of the State Bank of USSR. The statute of 1991 made the Bank subordinated to 

the Parliament and to Government (Wellisz 1996). In 1991-1994 period the NBG was 

subject to substantial political pressure. It lent to the Government and gave overdraft 

facilities without limits. The situation changed in June 1995 when the new law, based 

on the IMF project, strengthened the Bank's independence. The newly granted 

independence was partially limited by the amendment of May 1996.