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National Bank of Georgia functions explained

By Sopo Datishvili
Tuesday, September 30
On September 24 the International School of Economics (ISET) in Tbilisi held a public seminar entitled “Challenges for Central Banking in Georgia.”

ISET, part of Tbilisi State University, is a project jointly funded by several organizations and governments, including the Open Society Institute, the Government of Georgia, the Norwegian Ministry of Foreign Affairs, British Petroleum, the Swedish Agency for International Development Cooperation and the World Bank. Every year, around fifty students from Georgia, Armenia and other countries receive a Masters degree in economics from ISET. The school boasts that its foundation was the result of Georgian Prime Minister Zurab Zhvania’s request to the World Bank President that he create an institute for training young economists.

The seminar held on September 24 was dedicated to a presentation by Robert Tchaidze, Assistant Professor of ISET. The presentation was designed to be very simple and easy to understand, without the use any formulae or numbers, as sometimes ordinary people have only a vague idea of what the work of the National Bank of Georgia is.

When the floor was opened for questions, Tchaidze spoke about the challenges facing the National Bank of Georgia and his recommendations for resolving them. The de facto independence of National Bank of Georgia was highlighted as the main guarantee of economic stability in the country. Crucial factors in ensuring that independence are suitable legislation, the NBG’s separation from spheres of political influence and the appointment of a non-politicized Chairman. Tchaidze also underlined the necessity of the development of the financial market and the negative aspects of mass privatization and external borrowing, which can lead to fluctuations in the exchange rate and large increases in the money supply. He further underlined the necessity of obtaining accurate inflation figures, as these were important not just for household budgeting but at National Bank of Georgia level.

The seminar served its purpose of explaining the problems and challenges of central banks in a simple way, and was followed by an audience discussion involving ISET students, National Bank of Georgia representatives and the President of the Georgian Chamber of Trade and Commerce, Jemal Inaishvili.