Reserve Requirements For Foreign Currency Liabilities To Be Increased To 15 Percent

The Monetary Policy Committee of the National Bank of Georgia decided to increase to 15 percent the reserve requirements for the foreign currency liabilities starting from February 17.

The National Bank of Georgia have released a report on the change.

As for its Main Policy Rate (the refinancing rate), the NBG decided to keep it unchanged at 7.5 percent

Annual inflation reached 11.2 percent by the end of 2010. The contribution of food in total CPI growth was around 9.5 percentage points. Despite high inflation, there is low inflationary pressure from demand. At the same time, food inflation feeds higher inflation expectations. According to the forecasts, high inflation will hold during the first months of the year and then start decreasing.

The annual growth rate of monetary aggregates has declined. It is expected that during the year the annual growth rate of broad money will be within 20-25 percent, thus supporting in the medium term the decrease of the inflation rate down to the target value. During 2010, the bank loans extended to the economy increased by 20%. This happened mostly through local currency loans, although in the recent period the foreign exchange loans have grown as well.

The NBG will closely monitor developments in the economy and financial markets and will in due course act accordingly. In case of continued inflationary pressure the NBG is ready to further tighten its monetary policy.