National Bank Explains Why It Purchased $10 mln

On November 9, the National Bank of Georgia (NBG) announced they had purchased $1 million on the Foreign Exchange Auction, noting that the weighted average exchange rate was 2.7220 per dollar.

This was the ninth foreign currency intervention in 2018. In total, the National Bank purchased $112.5 million in 2018 alone.

The last purchase raised many questions in society and among economic experts as to why the NBG is buying dollars when there is a pre-election period in the country and the national currency GEL is continuing to devaluate against the US Dollar.

NBG President Koba Gvenetadze explained that this step was necessary to fill the reserves of the bank.

“We have done this many times in the past. I have already mentioned that the NBG's currency reserves are not adequate, so when the market allows us, we will always buy foreign currencies to fill the international banking reserves of the National Bank,” Gvenetadze said, adding that such interventions will take place again in future.

The President of the National Bank also commented on the fluctuation of the GEL in the recent period, adding that the exchange rate regime in Georgia is characterized by short-term fluctuations only.

“What is happening in the medium and long term period is much more important for us. The economic growth in the country is good. As you know, predictions are quite promising and the inflation rate is low. This is a more important economic indicator than the exchange rate,” said Gvenetadze.

Georgia’s Finance Minister Ivane Machavariani also says that the purchase of $10 million by the NBG is a step to replenish reserves.

“The National Bank of Georgia behaves as is necessary in this case - it periodically complements foreign currency reserves. Our currency reserves are far less than the level our economy requires,” he said.

The Minister explained that the International Monetary Fund (IMF) also calls on the NBG to periodically fill its reserves.

Machavariani says this intervention was not so important to significantly affect the national currency exchange rate.

He believes that the GEL will start gaining value, as there are no fundamental problems in the Georgian economy.

“The fundamental indicators of the economy are absolutely solid. Today, our economy is as sustainable against external shocks as it has ever been before... Consequently, the fluctuation that occurred in recent weeks was absolutely speculative. I cannot say what exactly the national currency rate will be, but I am sure that the GEL will continue to strengthen,” the Minister said.

At present one US dollar costs GEL 2.7146, while €1 is 3.0800 GEL.

By Thea Morrison

Photo: NBG President, Koba Gvenetadze. Source: 1 TV