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Problems the local currency could face

By Messenger Staff
Monday, May 3
The National Bank of Georgia has started promoting the use of the lari (GEL) and is encouraging issuing loans in GEL. This measure is designed to decrease risk, as deposits in GEL suffer less fluctuation than those in USD.

Statistics show that physical and legal entities often keep their deposits in USD and Euro on the basis that these currencies are more reliable. Over the last 20 years Georgia has been struck by high inflation several times. In 1994, when Georgia withdrew from the rouble zone and the transitional currency the Cupon was introduced it devalued 422 times. When the Georgian national currency the GEL was introduced on October 2, 1995 it was set at 1 to 1 against the USD but as soon as it started being traded it was 1.25 GEL to 1 USD. At certain times the rate was a low as 2.265 GEL to the dollar.

In 2004-2007 the GEL was quite stable but in 2008 after the Russian invasion and global financial crisis the situation changed and the inflow of foreign currency decreased considerably. In November 2008 the NBG corrected the lari to dollar rate to 1.65 instead of 1.44.