Currency collapses now the elections are won
By Messenger Staff
Monday, June 7
The GEL fell rapidly against the USD on Friday, and reached its lowest point against the USD in the last 4 years. The National Bank stated that from June 5 the official exchange rate would be 1 USD to GEL 1.8431.1, having been 1 USD to GEL 1.8231 on 4 June.
1 EUR will be worth GEL 2.2438 from today according to the National Bank. Yesterday 1 EUR was GEL 2.2340. 1 Rouble was worth about 6 tetri, GEL 0.059012. The GEL rate however varies at different currency exchange points and banks, in some of which 1 USD costs over 1.90 GEL.
This is the second significant collapse of GEL since November 2008, when the post-war Georgian economy, also feeling the effects of the global financial crises, could not preserve the artificially high GEL rate against foreign currencies. Then the GEL fell more than 20 points against the USD.
In a statement to Interpressnews member of the Christian Democrats Nika Laliashvili said that the fall of GEL is directly related to the fact that the country is import-dependent and local industry is not developed, while acknowledging that the postwar period and global crisis also had an effect. Economic analyst Nodar Khaduri told The Messenger that there are many reasons behind the GEL’s fall. “The main reason for the GEL’s devaluation is the negative trade balance, in which imports greatly exceed exports, as this increases the demand for foreign currency. The second significant factor is that the postwar period and world crisis decreased foreign direct investment inflow, which is vital for the country’s economy.” Khaduri emphasised that the financial aid received following the Brussels donor conference also played an important role in the stabilisation of the GEL, but these funds are running out. Khaduri also added that the current rate will not be stable and it will fall to 2.00 GEL against the USD.
Political analyst Soso Tsiskarishvili has told The Messenger that the GEL fall has been expected and the Government should have implemented this gradually, not try to artificially preserve the GEL rate.However, “The Government could not do this before the election since it would increase the negative attitude of the electors towards it. After its victory the Government can now afford to take such unpopular steps,” stated Tsiskarishvili.