Ivane Matchavariani on the Lari Fluctuation

No opponent was able to name even one step the government might have taken to cause caused the currency fluctuation,- stated Ivane Matchavariani, Minister of Finance of Georgia, in an interview on TV Pirveli.

The Minister noted that measuring the efficiency of the government according to the Georgian Lari (GEL) currency is ignorance and in no way reflects its effectivity.

“We have to understand that we have a free exchange currency. And fortunately or unfortunately, this makes it vulnerable to external factors. Obviously, our currency cannot remain neutral in terms of the ongoing processes in the region. Thus, there are particular fluctuations periodically. Its instability may be caused by increased expenses during excessive fiscal policy. It can also be seen in the impact of the monetary policy. Currently, both parameters are within the set norms. Therefore, the present currency is a reaction to the market economy,” said the Minister.

He then focused on the outcomes that would result from the artificial involvement of the government and National Bank in a free exchange currency.

“We have another alternative, which is to soften, stop or intervene in this reaction to the market economy and the ongoing processes in the region, but it is not a responsible decision and approach and will bring no outcome in the long-term. Such steps can fix the currency at a particular figure for the short-term – several months or years, as has already happened in Georgia, as well as other countries, but as a result, we will have to pay with a low economic growth, fewer workplaces and other impacts. That is why it is vital to maintain a free currency, develop the economy and carry out reforms, which as result will decrease the fluctuation. 

"Selling the dollar and putting it into circulation is not a healthy or normal response: it is a short-term, irresponsible approach. Our aim is to strengthen the Georgian Lari, to make the population less vulnerable to the currency fluctuations, to keep to the reforms, to contribute to the augmentation of exports and to make the economy of the country the strongest in the region. We have to continue moving on this path for the fluctuations and vulnerability to them to be minimal: this is the only way for the long-term. The second approach is more populist, sure, we can fix the currency now, but we'll get a worse result in future. The government and National Bank will not make populist steps to solve the problem in the short-term; it will continue on the sustainable economic course, representing the only solution for the long-term, bringing with it fruitful outcomes,” he said.  

Translated by Ketevan Kvaratskheliya