Gov't encourages exports as GEL continues to fall

As of December 3, 1 GEL was valued at 1.8604 USD. Photo by N.Alavidze/, 28 Jan 2015 - 13:11, Tbilisi,Georgia

Georgia’s national currency, the Lari (GEL), is continuing to depreciate despite lifting slightly after a massive slump - but the Government has taken action to combat the falling currency. 

In response the National Bank of Georgia established a new official exchange rate where $1 USD cost 2.0144 GEL, starting from January 28.

Before now the exchange rate was 1.9962 GEL and in one day it shifted by 0.0182 GEL.

National Bank president Giorgi Kadagidze said the Bank’s main goal was for the depreciating value of the Lari not to have a massive flow-on effect and result in a vast increase in price of commodities, particularly food and products. 

Despite the fact there has been a significant increase in inflation expectations and prices, we still do not face a price increase in general. The price of oil and other commodities have declined and this affected the stable price rate in Georgia," Kadagidze said. 

"In addition, in regards to our partner countries, the GEL has not depreciated. If we see the situation become tense in this direction, I think tightening the monetary policy would be an appropriate solution,” he said.

Meanwhile, representatives of the Government's economic team announced action had been taken in order to maintain long-term stability of the national currency. Officials said measures had been put in place to encourage export, tourism and Foreign Direct Investments (FDIs) in Georgia. 

A Government Minister commented on the depreciating value of the Lari and said the country had a floating exchange rate and the situation was "under control".

Georgia’s Finance Minister Nodar Khaduri said several offshore investors had already shown their interest in investing in "interesting projects" in Georgia. He said FDIs had increased by 100 percent in the third quarter of 2014 and he expected better results for the fourth quarter.

"We understand that investors are careful about making investments not only in our region but in general. Although we have held negotiations with several investors and discussed opportunities of future cooperation,” Khaduri said.

As for the Lari depreciation, if we compare Georgia to other countries in the region we will see that almost every national currency has depreciated and in comparison, the Lari has maintained its stable position. We understand that foreign factors have changed, including exports. This is why we have decided to encourage export, tourism and FDI inflow in the country,” he added.

Meanwhile, Georgia’s Economy Minister Giorgi Kvirikashvili announced a special institute will be established to stimulate the export environment.

"We have evaluated how much this affects our economy. We have also set up good steps for the future. We are setting up an institute to stimulate exports. The state will provide export guarantees to private companies [and] export funding institutes will be created in the near future," Kvirikashvili said.

He added: "But today there is no need for using the Central Bank reserves."