Georgia’s economic team believes Lari will stabilise

Updated on 17:24

The National Bank of Georgia (NBG) made its third intervention in 2016 of $20 million USD at the Foreign Exchange Auction, as the exchange rate of the national currency, the Georgian Lari (GEL) against the USD was set at 2.4984 per one US dollar.

Earlier at 16:30

"In the nearest future the Lari will stabilise”, says the president of the National Bank of Georgia (NBG) Giorgi Kadagidze.

The Georgian national currency is continuing to fall following a drop in oil prices in Georgia’s neighbouring countries and a high share of deposits in US dollar, explained Georgia’s economic team.

Today the country’s economic team, which comprises of NBG president, Georgia’s Finance Minister, Economy Minister and Prime Minister, announced there was no "domestic reasons” behind the rate dynamic of the national currency.

The experts forecast the Lari would stabilise in the nearest future.

If not we will tighten the monetary policy,” said the NBG president.

However, he added tightening of the country’s monetary policy had many "negative effects” including a reduction of the country’s economy.

What is the reason? 

Despite the fact Georgia’s Prime Minister Giorgi Kvirikashvili believed the Lari depreciation was caused by external factors, he said the Georgian Government was taking action to "lighten the external effects” on the Lari.

"Using all the tools available in the Government’s hands we are doing everything to minimize the [external] effects. Of course we understand this is very painful for the majority of our society.

Devaluation of the Lari is caused by the devaluation of our neighbouring countries’ national currencies. We are integrated in their markets, we have trade links and it is impossible [the processes happening in our neighbouring countries] are not reflected on the Georgian exchange rate,” said Kvirikashvili.

The NBG president confirmed Kvirikashvili’s explanation about the reasons behind the Lari’s devaluation, and cited the "negative processes” in Georgia’s neighbouring countries were the main causes of the Lari’s depreciation.

Below is a graphic were you can see a comparison of the national currency rates of three Caucasian countries plus the Turkish Lira in the past 30 days. The blue line shows the Azerbaijani Manat, the red line shows the Turkish Lira, the green line represents the Armenian Dram, while the orange line illustrates the Georgian Lari’s rate against one USD.

The comparison graphic was made online today at 17:07 Tbilisi local time using a tool from www.bloomberg.com.

Georgia’s Economy Minister Dimitry Kumsishvili explained another reason for the Lari devaluation was because people were converting their Lari into USD and saving their money in US dollars.

PM Kvirikashvili said imports had been reduced by 25 percent "compared to the last month”, but he expected the Lari would stabilise soon.