Georgia’s Prime Minister, Giorgi Kvirikashvili, claims the recent devaluation of the national currency to the US dollar was because of positive tendencies, referring to increases in import and consumption.
The PM stressed that import and consumption increased in Georgia; however, monetary problems in the countries Georgia exports its production to caused the complications with the national currency. Now, 1 USD is equivalent to 2.48 GEL based on the National Bank exchange rate.
'Positive trends’ in lari devaluation
By Gvantsa Gabekhadze
Tuesday, Novemmber 15
The price is higher with private financial organisations, reaching 2.50 USD.
“Exports have increased too, but it cannot equal the imports, as market prices have significantly fallen in the countries where we export our products to. This is the reason behind what is happening now. We have started to correct the import figures, as a result of which our national currency will strengthen in the coming months,” Kvirikashvili stated.
“We also plan to take some artificial efforts in terms of certain regulations in order to assist the lari to strengthen,” the PM added.
He stressed detailed information about the planned measures would be shortly announced together with the President of the National Bank.
Ex-head of the National Bank of Georgia, now a member of the United National Movement opposition party, Roman Gotziridze, called the PM’s statements “ridiculous”.
Gotsiridze stressed it was impossible for Georgia, which has a free trade regime with its key trade partners, to directly correct the import deficit.
“ There are two ways to decease imports; either budgetary expenses must be deceased or the lari must devaluate further,” Gotsiridze said.
Economic analyst Temur Basilia believes several factors had an influence on the lari exchange rate: the monetary policy of the National Bank of Georgia, the political situation in the country, the country’s tax balance, currency market players’ conducts and currency manipulations.
However, he stressed the conduct of the National Bank was the most important in terms of currency issues.
“The recent devaluation was caused due to two reasons: the high rate of dollarization and decreased demand on Lari and the National Bank’s decision to issue excess amount of Lari in circulation. Over the last four months the National Bank issued more than 1 billion excess Lari in circulation,” Basilia said.
The analyst added that the excess money appeared because of issuing re-financing loans given by the National Bank to commercial banks for them to meet their obligations.
The analyst and fellow economic expert Paata Sheshelidze believes the National Bank should suspend issuing excess amounts of the lari in order to help the national currency strengthen.