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IMF Offers Georgia Loan, Sees Growth Slowing

A building hit by Russian bombing in Gori, Georgia
TBILISI -- The International Monetary Fund has agreed in principle to lend Georgia $750 million to soften the economic impact of a war with Russia, which may slow growth significantly, a senior fund official says.

"Today we have reached an agreement in principle with the government on a loan package. The amount will be $750 million. It will be made through stand-by arrangements. It will last for 18 months," David Owen, IMF Middle East and Central Asia Department senior adviser, told Reuters in an interview.

The loan package is to provide support for the government's economic policies and to "help to mitigate negative impact on the economy from the recent conflict."

"I won't be surprised if the annual growth did come down significantly by the end of the year," Owen said.

In March, the IMF had predicted growth of 9 percent in 2008. Earlier in the day, Georgian Economic Development Minister Eka Sharashidze said the economy could expand just 5-6 percent this year after 12.4 percent growth in real terms last year.

"It could be even slower" than Sharashidze's forecast, Owen said.

Georgia has requested $1 billion to $2 billion in international aid to repair and develop infrastructure in the wake of the conflict in August, when Russia invaded to put down Tbilisi's attempt to retake two separatist provinces.

Russian bombing raids hit mainly military targets, but Georgia also reported considerable damage to civilian infrastructure.