National Bank fights inflation

National Bank of Georgia is trying to activate monetary levers by taking excess Lari out of circulation in order to try to prevent inflation. Meanwhile the Georgian government is carrying out somewhat contradictory measures by distributing electricity vouchers worth a total of GEL 20 million with a further promise of food vouchers in March worth GEL 30 million. Such an act of course creates the appearance of extra money (although in a disguised form) in the country. Today the Georgia Lari stands at approximately 1.77 to the USD, while in January it had fallen to 1.81 against the USD. At that time there was GEL 1.618 billion circulating in the country. Now, following steps taken by the National Bank by February 1 the circulation is around GEL 1. 474 billion and inflation has been temporarily halted. A reminder of previous monetary circulation – in 2005 the money circulation in Georgia was GEL 693 million, in 2006 – GEL 795 million, in 2007 – 893 million, in 2008 – 1.405 billion and in 2009 1.221 billion.

Analysts predict that the issue of various kinds of vouchers will increase the risk of inflation in Georgia.