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How to make national currency stable

By Tea Mariamidze
Wednesday, November 16
The Government of Georgia (GoG) released a statement on Tuesday listing the factors of the devaluation of the national currency, the lari (GEL), against the United States (US) Dollar, including future strategies to stabilize the GEL.

The government said the floating exchange rate of Lari fluctuates on the grounds of domestic and external macroeconomic factors and negative expectations, created within the country.

The statement of the government says that significant depreciation of national currencies in Georgia's neighboring trade partner countries is one of the main factors behind the currency's fall in value, accompanied by an increased outflow of foreign currency conditioned by import volumes in recent months, which failed to re-balance against exports due to declining prices at the export markets.

Moreover, the government believes that negative expectations towards the GEL rate, resulting from the attempted speculations made by various groups, worsened the situation.

“Consumer price index (CPI) is not increasing in parallel with the above-listed factors. Moreover, the National Statistics Office has reported declining prices in recent months. The most pressing problem faced by the population of Georgia is based on the excessive dollarization of the loan portfolio,” the statement of the GoG reads.

However, the statement also says that the GoG and the National Bank of Georgia (NBG) plan to carry out a series of combined measures through consultations with the International Monetary Fund (IMF).

Key focus will be made on the acceleration of economic growth in the State Budget of the following year, thus increasing the portfolio of infrastructure projects. In addition, administrative expenditures will be reduced significantly and State Budget for 2017 will be aimed at strengthening the stable and sustainable fiscal environment. A similar approach will apply to the State Budgets of the following years.

A Joint Action Plan will be announced in the coming days, and it will entail specific steps towards a gradual reduction of the dollarization rate on the grounds of market economy principles.

The government believes that after taking the abovementioned measures, economic growth will be accelerated both in short and long-term perspectives, and the plan will lead to positive expectations and the stability of the exchange rate.

Georgia’s President, Giorgi Margvelashvili expressed hope that the governmental plan would stabilize the national currency soon.

“The president believes that during such times it is necessary to take fast, efficient and sometimes extraordinary steps to ensure that people's living conditions are not endangered,” the President’s Spokesperson, Eka Mishveladze, said.

The government's statement was followed by criticism from the main opposition party, the United National Movement (UNM), which says that Lari devaluation is the result of the government’s inefficient policies.

The UNM believes the statement is a bad message towards investors, financial sector and can lead to more complicated situation.

“The statement of the GoG revealed that the government does not have a correct understanding of the depreciation of the Lari and of the difficult economic situation in the country,” stated the UNM member Roman Gotsiridze.

Economic experts say the most effective way to improve economic situation in the country is the reduc5ion of administrative expenses.

“The expenses should be categorically halved. This issue does not need any further discussions and declaration. It really has to be done,” stated economic analyst Davit Tsikaridze.