Business Association President: NBG should continue interventions for GEL stability

Soso Pkhakadze, President of the Business Association of Georgia, believes that the National Bank of Georgia (NBG) should intervene in the currency market and continue foreign exchange interventions.

Pkhakadze believes that the devaluation of the national currency GEL (Lari) is not caused by the external shocks but by the recent developments in the country and negative expectations.

“All macroeconomic parameters, including fiscal discipline, are healthy. However, Lari’s benchmark we have today does not reflect the real macroeconomic situation. In addition, it is fair to say that we have no external shocks today. The national currency is quite strong in all trading partner countries,” the statement of the Business Association President reads.

He also mentioned the flight ban Russia imposed on Georgia, adding the expectations that it would turn into the trade embargo with Russia, did not come true, luckily.

“At present, the GEL exchange rate is subject to the “expectations premium,” which is conditioned by a number of negative expectations created in Georgia recently. At this time, whatever the exchange rate regime in the country, the central bank should naturally intervene in the foreign exchange market,” he added.

Pkhakadze says the Business Association welcomes the last intervention of the NBG, which took place last week when $1 reached GEL 3.

One of the instruments of the NBG is the international currency reserves, which is the largest asset in its balance sheet. As of July, the volume of reserves is approximately $ 3.5 billion. Last Thursday the NBG sold $40 million on auction from its reserves which slightly regulated the currency rate and GEL started to gain value.

According to Pkhakadze, in 2014-2018, the National Bank of Georgia acted very reasonably as a result of which the exchange rate adjustments absorbed the most severe foreign shocks, and Georgia was indeed one of the least affected countries by these processes.

“Today, the situation has changed, and therefore, a different kind of currency policy is needed. We are in constant contact with both the National Bank and the Government of Georgia, and naturally, we will do our best to contribute to the regulation of the domestic currency market,” the statement reads.

The Business Association President expressed hope that with the joint efforts of the National Bank, the government and economic team, the Lari exchange rate will be lowered in the coming days.

The data released by the National Bank of Georgia reads that $1 costs GEL 2.8946 while ˆ1 is GEL 3.2312 and ?1 equals GEL 3.5164.