Georgian GEL Reaches Record-High Depreciation against the Dollar

Georgian currency GEL (Lari) has been continuing to lose value against the United States Dollar and Euro in recent days.

On May 30, the GEL rate against the US Dollar was 2.7997 while it was 2.7676 on May 21. The Euro equals GEL 3.1236, GEL 3.0954 just a week ago.

President of the National Bank of Georgia (NBG) Koba Gvenetadze says this is a short term fluctuation and it will be followed by GEL stability soon. He says the main reason for the national currency exchange rate is external factors.

“The floating exchange rate performs a shock absorbing function. If you look at the last three years, we have examples of this,” Gvenetadze said.

He explained that many factors influence the current exchange rate and most will be better understood after a few months.

“It is not possible to explain the current dynamic of currency fluctuations and because of this, central banks, and also organizations of macroeconomic profile, do not usually comment on such cases and short-term perspectives," the NBG President said.

As Koba Gvenetadze explains, inflation in Georgia is moderate.

“According to April data, annual inflation is 4.1%, but at the same time it is important to note the impact of such single factors, such as excise and oil prices, on inflation. Besides, it should be noted that basic inflation is 1.4%, according to April data, which indicates that we are not experiencing an inflation,” Gvenetadze said.

He added that the National Bank is working to increase the volume of international reserves, but it is not necessary to actively purchase reserves at this time; further, that the National Bank of Georgia's international reserves were inadequate for many years and today the volume of reserves has become close to the adequate level, which is important for the country.

Gvenetadze’s statements were criticized by the opposition. United National Movement (UNM) says the economy of the country is in danger.

“The budget needs to be changed and the parliament has to do it as soon as possible. It has some leverage for this. We need to make the authorities and the NBG stop the devaluation of the Lari,” Roman Gotsiridze from the UNM stressed.

The European Georgia party is also of the same position. One of the leaders of the party, Giga Bokeria, says the country’s economy is growing very slow and this affects the currency.

“With such an economic growth pace, we will never get rid of poverty…And the answers we hear from the government are ridiulous. They blame anyone but themselves,” Bokeria said.

By Thea Morrison

Image source: Imedinews.ge