National Bank of Georgia lowers foreign currency minimum reserve requirements for commercial banks

The National Bank of Georgia (NBG) has decreased the minimum foreign currency reserve requirements for commercial banks in Georgia from a mandatory 30 per cent to 25 per cent, which will allow commercial banks to lend the freed up five per cent –  about $700 million.

The decision comes into force today.

• Minimum reserve requirements are funds which banks are required to hold as reserves in the national, central bank.
• The reserves allow banks to react to short-term changes in the money markets and help to stabilise the interest rate banks charge each other for short-term funds.

We believe that the decision will support stabilising Georgian lari and will decrease interest rates on the loans which are in USD”, the Georgian National Bank says.

According to data released in September by the National Statistics Office of Georgia (Geostat) the annual inflation rate amounted to 6.4 per cent.

As the Georgian lari depreciated, the National Bank of Georgia increased the refinancing rate twice up to 7 per cent and then up to 7.5 per cent last month.

• National Bank of Georgia increases refinancing rate to 7.5%

Also, the NBG sold foreign exchange reserves of $32.8 mln [August 2019] and $40 mln [September 2019] on auction to strengthen the Georgian lari.

• Georgian National Bank has sold $40 mln amid Georgian lari depreciation