In late 1992, the government inaugurated its Medium-Term Program of Macroeconomic Stabilization and Systemic Change focusing on price and trade liberalization, budget constraints for public enterprises, and privatization. As part of a small enterprise privatization program, the first auction of small-scale assets was held in T'bilisi in March 1993. Practically all housing has been privatized, as well as a high percentage of agricultural land. Privatization was progressing as of 2003, and the government was developing the legal framework necessary for a good climate of investment. Nevertheless, due to a lack of enough foreign direct investment in 2003, the transportation and communication infrastructure remains in poor condition.
In spite of these reforms, political instability continues to hamper Georgian economic development. Although the Baku-Tbilisi-Ceyhan oil pipeline brings much needed foreign investment, most observers feel that the fate of the Georgian economy hinges on the ultimate fate of the Caucasus.
Corruption hampers economic development, and has undermined the credibility of the government's economic reforms. The size of the shadow economy is also a concern. The Paris Club rescheduled Georgian debt in 2001. That year, Georgia negotiated a three-year $144 million Poverty Reduction and Growth Facility (PRGF) Arrangement with the IMF, which was due to expire in 2004. The IMF encouraged the country to implement tax reform, to improve revenue collection, strengthen the banking system, and to combat corruption and smuggling.