Georgian Econ Minister Blames Brexit for Lari’s Sudden Decline
TBILISI – Georgia’s Economy and Sustainable Development Minister Dimitry Kumsishvili on Monday said the sudden precipitous drop of the Georgian lari’s value against the US dollar can be traced to the UK’s decision to withdraw formally from the European Union.
In a referendum held on June 23, 52 per cent of voters in the United Kingdom opted to end their formal membership in the EU and sent shockwaves around the world as the future of the EU and UK, itself, came into question.
With UK voters opting to be the first to seek a formal divorce with the EU, Britain’s exit – or Brexit – from the European Union has sparked widespread panic on the world’s financial markets. Several of the world’s national currencies have gone into a tailspin as the value of the euro slid against the dollar, and the British pound hit a 30-year low against the greenback.
The Georgian National Bank set Monday’s lari exchange rate against the dollar at 2.2941 GEL/USD 1, a sharp 2 per cent drop from Friday’s closing rate.
"This is most likely a one-off that is directly connected to the UK’s decision to quit the European Union. This caused the euro and pound to weaken significantly and the dollar to rise. Of course, this immediately affects our currency," Kumsishvili said in a televised interview with Georgian news agency Rustavi-2.
The lari had been experiencing a rebound in recent months after hitting an all-time low of 2.4998 on February 13. As recently as June 9, the lari had strengthened by 15 per cent to 2.1196 against the dollar, its highest rate in nearly 18 months.
Georgia’s National Bank maintains a policy of sharply appreciating the lari by occasionally purchasing foreign currency at auctions. From March-June, the bank bought more than USD 298 million at 11 auctions.
Due to the current market instability and the volatile fluctuation in the lari’s rate, Kumsishvili advised the public to keep a close eye on the exchange and buy and sell foreign currency only when necessary.
By Nicholas Waller