How can the Lari survive?

Georgia’s national currency, the Lari, is already hitting 2, 44 against the USD. It is the official exchange rate set by the National Bank of Georgia (NBG). However, in commercial Banks and exchange booths the price climbs to 2, 47.

The situation is a real disaster for more than 60% of bank consumers in Georgia who take their salaries in GEL and pay their bank loans in dollars.

Prime Minister Irakli Garibashvili held an urgent meeting with the Cabinet Ministers and NBG leadership on September 21.

After the meeting, all sides stressed that in the mid-term period, the Lari would strengthen.

Minister of Finance Nodar Khaduri said that all the macroeconomic factors that affected Lari have been removed.

The NBG head Giorgi Kadagidze added that in the case of any additional pressure on the currency the National Bank was ready for tough monetary interventions, even the currency spending.

He also stated that the government was also ready to correct the budget if necessary.

Meanwhile, the President’s administration has appealed to all sides, even the just-created Financial Supervisory Agency, to carry out joint steps in order to ease the currency complications.

However, the administration still claims that depriving the NBG of its supervisory functions to financial institutions and giving the function to the Financial Supervisory Agency on September 3 this year had nothing in common with the currency devaluation and was a wrong solution.

In his interview with the Kvris Palitra newspaper, Georgia’s Minister of Infrastructure and former chairman of the Cartu Bank, Nodar Javakhishvili, admited that the Lari devaluation was not because of the NBG policy.

He added that if the devaluation continues, Georgians would not pay loans and will have to sell everything they have to cover their bank obligations.

In response, the former head of NBG Roman Gotsiridze stated that the statement was belated and it should have been made before Parliament approved the bill elaborated by majority members over NBG.

The opposition places all blame on the Government and stresses that the authorities’ irresponsible and inadequate actions led to the devaluation.

The opposition parties, the Free Democrats and the United National Movement, intend to appeal the separation of the financial supervisory functions from NBG to the Constitutional Court.

Several majority members stated that the Lari devaluation was the NBG’s fault. Now the NBG is deprived of the right to control financial institutions.

The government also said that the devaluation was encouraged by outer macroeconomic factors. However, the Minister of Finance has just stated that the factors have since been removed.

The government has never admitted that it has made any mistakes.

Now there is nobody the government to point its finger at if the Lari will continue to be devalued. If the situation is not controlled, the government will have to recognize its own errors.