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IMF: lari devaluation is because of external shock

By Gvantsa Gabekhadze
Friday, March 6
IMF representatives, who had been studying Georgia’s economic troubles over the last several days, stated that the severe devaluation of the Georgian currency against the dollar was because of “external shocks.”

“The crisis in Ukraine, the deepening recession in Russia and the currency devaluations in Georgia’s trading partner countries in the region, have led to the decline in exports and remittances, resulting in lower foreign earnings and causing depreciation of the lari,” the IMF says.

The IMF assessed the steps carried out by the Bank of Georgia positively, and stated there are some issues that should be settled through consultations behind closed doors, between the government and the National Bank..

“The political attacks on the National Bank is not the right answer,” said Mark Griffiths, IMF mission head.

The IMF stresses that GDP growth, which had been expected to reach 5%, may reach 2%, but even that was a subject to risks.

They advised the authorities to keep the budget deficit under control, cut spending or increase taxes, or both.

However, they emphasized that social spending should be maintained, but target groups should be clearly specified.

One more recommendation to the government also concerned Georgia’s business environment. They appealed to the government to accelerate reforms and ease the recent restrictions on foreign businesses.

The IMF also responded to the statement of the Deputy Minister of Infrastructure Nodar Javakhishvili, who stated a couple of days ago that the IMF’s recommendations would be partial, in favor of the National Bank of Georgia, when it was the head of the National Bank of Georgia Giorgi Kadagidze who took the wrong steps that led to the lari devaluation.

IMF called the accusations ‘unfounded’.

The Minister of Finance Nodar Khaduri stated that the government acts as one team to defeat the economic problems and that they would take the IMF’s recommendations into account.

During the last several months, the Lari has lost 29% of its value against the dollar. The current lari rate to the dollar is 2.10.