NBG Sells USD 20m to Strengthen Lari

The National Bank of Georgia (NBG) sold USD 20 million at a foreign currency auction last week in order to support the national currency Lari (GEL) which, as a result, strengthened to 2.4023 per U.S. dollar from 2.4107.

The move marked the central bank’s ninth intervention this year with total sales reaching USD 286.96 million.

The beginning of this month saw Georgia’s foreign exchange reserves at USD 2.479 billion, up from USD 2.449 billion the previous month, and down from USD 2.699 billion at the beginning of 2015.

IMF mission said on December 8 that it “strongly supports the NBG’s policy to allow the Lari to float and to limit foreign exchange interventions only to dampen excess exchange rate volatility.”

The Lari has been stable at around 2.39-2.40 to the USD since the summer, yet since the beginning of the year has lost 27.6% of its value and 37% since November 2014, when the Georgian currency began to depreciate due to global strengthening of the USD and a slowdown in export.

The depreciation of GEL has increased the debt burden of borrowers with loans in USD. Around 64% of the total loans in Georgia have been taken out in a foreign currency, the majority of those in USD.

Katie Ruth Davies