Georgia’s central bank to tighten monetary policy in response to lari devaluation

"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.

As of today $1 costs 2.68 GEL and €1 is equivalent to 3.14 GEL. From tomorrow, $1 will cost 2.69 GEL and €1 will cost 3.19 GEL.

Mestvirishvili made a further explanation and clarified that while talking about the exchange rate the NBG means a nominal effective exchange rate of not only one currency, but "we mean the average weight of our trading partners’ currencies”.

Mestvirishvili stated 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.

We noted several times that there is a floating exchange rate in Georgia and the market is characterised by variability, which is the usual behavior of this market. As for the recent fluctuations I can say that the fundamental factors which affect the exchange rate are positive. What we see now is a result of expectations. For example, the importers who used to purchase currency in January-February started this process from August and are very active in recent period as well,” Mestvirishvili said.

Also today, the NBG released a statement in which it revealed the list of financial organisations of Georgia which participate in the Bloomberg trading system.

The widespread belief that only two of the biggest banks participate in the Bloomberg trading system is incorrect. 24 organisations use the Bloomberg system in Georgia, of which 16 commercial bank and four microfinancing organisations actively trade with foreign currencies.

In his words the trade activity of Georgia’s financial institutions in the Bloomberg trading system is determined by their clients' buy-sale assignments.