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National Bank sees nothing alarming in Lari Inflation

By Tea Mariamidze
Monday, December 8
Head of Georgia’s National Bank Giorgi Kadagidze held a special briefing on December 5 dedicated to the Lari’s devaluation. Currently, 1 USD is valued at 1.95 GEL.

The National Bank of Georgia (NBG) believes that there is nothing alarming in the current situation.

Giorgi Kadagidze said that there were two reasons that gave him optimism that there was no risk of higher inflation in the country. These were the globally decreasing cost of main commodities, and unlike previous years, the money supply had not been increased.

Kadagidze was confident the depreciation of the Georgian Lari was caused by "inside and outside factors”.

"Historically, Georgian Lari to US Dollar exchange rate has been trending lower in the past seven years and the sources of the inner currency inflows have been weakening. We believe this imbalance has already been eliminated and it has already reflected on the Lari exchange rate,” Kadagidze said.

He stressed that the National Bank was observing the situation of the past few days and found out that the process was mainly caused by the excessive behavior of industry insiders, which is generally characteristic of the financial markets.

Kadagidze called on market insiders not to make "unwary” decisions regarding converting money as they would always lose. "After the decline, comes the rise,” he said.

Meanwhile, Prime Minister Irakli Garibashvili met the economic profile members of the cabinet of ministers and discussed the situation in the country.

"The Government of Georgia has been pursuing a consistent policy, therefore, there is no fear of worsening the financial stability and the Lari exchange rate over a long-term period,” the press office of the Prime Minister said in a statement.

Some staff changes were carried out within the economic team of the government.

At the Economic Council under the Prime Minister, Secretary Roman Chkhenkeli will be replaced by Business Ombudsman Giorgi Gakharia. The government Press Service says that Gakharia has actively cooperated with the business sector for the past two years and was well aware of the ongoing economic processes.

Minister of Finance Nodar Khaduri hopes that the exchange rate will not increase any more. “It will become stable during next week and it is also expected to drop,” he said.

Analysts believe that the Lari devaluation creates a negative situation for Georgian citizens, who mainly have not high salaries and get their salaries in Lari. According to analysts, the devaluation affects those citizens especially who have bank loans and have to pay interest rates in dollars.

Former head of the National Bank Roman Gotsiridze accuses the government of the current negative developments with regard to Lari. He stresses that the government failed to reasonably plan the budget, and says that the devaluation will cause negative consequences for the state budget and will affect both people and banks. However, fellow analyst Sopio Khorguani believes that inflation is taking place in many countries currently and there is nothing unusual or alarming in the current rate of the lari.