Government reveals short-term plan for national currency
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UPDATED: 17:36
The President of Georgia Giorgi Margvelashvili is welcoming the Government’s decision to work with the National Bank of Georgia to stabilise the Georgian Lari (GEL).
Margvelashvili hoped the Government and the NBG would create a joint action plan to stabilise the national currency in in the shortest period of time and reduce the impact of the fluctuating currency on the people of Georgia .
The President believed in this type of situation it was important to take fast, efficient and sometimes extraordinary steps so the general population are not affected.
The President noted he was in constant communication with the Government and the NBG regarding the Lari issue.
EARLIER: 11:14The Government of Georgia is promising to take steps to stabilise the national currency and even support the Georgian Lari (GEL) to regain value following a sharp decline since mid-August.
This morning the Government of Georgia made a special announcement that highlighted the ways how the Government was going to do it.
The Government believed a high dolarisation rate in the loan portfolio was the most acute problem people in Georgia currently faced. A high dolarisation was when the percentage of loans in US dollar in the total volume of foreign currency denominated loans was high, and the main reason for dollarisation was because of greater stability in the value of the foreign currency over the domestic currency.
Taking into account this challenge, the Government together with the National Bank of Georgia (NBG) and the International Monetary Fund (IMF) planned to take following steps to stablise the Lari:
- Next year's budget will focus on accelerated economic growth – the portfolio of infrastructural projects will be increased. At the same time administrative costs will be reduced.
- In the coming days the Government will announce a Joint Action Plan to stimulate a de-dollarisation process in the country, meaning that the share of loans in US dollar will be reduced in the foreign currency denominated loans.
As a result, the majority of the population will not depend on the short-term fluctuations of the Lari, caused by negative external factors, as the economic environment will be healthier in the country,” said the Government of Georgia today.
The Government also explained the floating currency rate in Georgia was dependent on internal and external macro-economic factors and expectations.
Meanwhile today 1 USD cost 2.4890 GEL. The previous rate was 2.4899 GEL.
Similarly today 1 EUR cost 2.6797 GEL, while the previous rate was 2.7098 GEL.
Georgia's Prime Minister Giorgi Kvirikashvili says his Government has taken steps to help the national currency regain value over the coming months as economic planners worked to restore the balance between the country's import and export values.
"The national currency is expected to appreciate in the mid-term and long-term period,” says the president of the National Bank of Georgia Koba Gvenetadze.
"The national currency is expected to appreciate in the mid-term period,” says Georgia’s Finance Minister Nodar Khaduri.
In a special statement today the Bank offered more details about its decision to sell of $40 million US dollars at the Foreign Exchange Auction yesterday.
The estimated real Gross Domestic Product growth rate of the country reached 1.3 percent year-on-year in October 2016, while the estimated real GDP growth reached 2.5 percent for the first ten months of 2016, latest figures show.
"We expect the [Georgian] national currency to stop devaluing [against the US dollar] in the near future,” says the National Bank of Georgia (NBG).
Georgia’s Finance Minister Dimitry Kumsishvili explains the national currency’s dramatic depreciation two days ago using a term economists call "supply shock”.
Global rating agency Moody’s is praising Georgia's plan to ease the loan obligations for citizens who have bank loans in United States (US) dollar by offering them to convert their dollar-dominated mortgage loans into the Georgian Lari (GEL)
"Some steps may not be easy today but are bound to be followed by rapid economic growth and a better future,” says Georgia’s Prime Minister Giorgi Kvirikashvili in a written statement released late last night.
The National Bank of Georgia (NBG) has sold millions of dollars at the Foreign Exchange Auction to control the changing value of the national currency against the US dollar.
Georgia’s National Bank (NBG) has released a statement in which it explained that the current devaluation of the national currency, the lari, is temporary and is caused by false expectations amongst the public that the lari would be devalued in autumn.
"The current devaluation of the national currency is temporary, however if it lasts for a long time and if it threatens inflation, we will react to it and tighten the monetary policy,” says Vice President of the National Bank of Georgia Archil Mestvirishvili.
The Georgian national currency, the lari, has depreciated in value by 6.5 tetri against the US dollar and by 4.3 tetri against the Euro in just one day.