New larisation program to convert 33,000 loans from USD to GEL

Georgia is taking actions to ease debt burden in the country caused by the fluctuation of the Georgian national currency, the Lari, against foreign currencies.

At today’s government meeting the Government of Georgia approved the Program on the Larisation of Loans - a one-time measure for borrowers who were hit hard by the sharp depreciation of the exchange rate.

The program will begin on January 17 and will continue for two months.

Per the program, loans received in US dollars before January 1, 2015 and signed for against real estate collaterals will be eligible for conversion into Lari-denominated loans.

In total 33,000 loans have been identified as falling under the program’s eligibility.

The program will be jointly-administered by the Government of Georgia and the National Bank of Georgia (NBG).

The Government will provide subsidies to ensure favourable exchange rates for loan-holders wishing to ‘de-dollarise’. In turn, the NBG will provide the appropriate level of cash liquidity in Lari.

The subsidy will not cover individuals whose sum of outstanding loans as of November 28, 2016 was more than $100,000, or if loans were transferred to another bank. The subsidy will also not cover individuals whose annual income in 2015 exceeded 100,000 GEL.

The NBG explained that January 1, 2015 was selected as the cutoff date because "according to existing estimates, loans issued before January 1, 2015 were affected the most”.

The exchange rate for loan conversion will be defined as the official exchange rate at the date of conversion minus 0.20 GEL (20 Tetri).

For example, if the official exchange rate on the date of conversion was 2.7 GEL per 1 US dollar, then the loan conversion rate will be 2.5 GEL per 1 US dollar. The difference between the exchange rates will be reimbursed from the state budget”, said the NBG.

Loans larger than the threshold will be subsidised within a $40,000 limit.

If the outstanding amount of a loan is $60,000, then only $40,000 will be subsidised. The rest of the 20,000, at the borrower’s discretion, will either remain a foreign currency-denominated loan or will be converted into a Lari-denominated loan, but without any subsidies”, said the NGB.