NBG Decreases Refinancing Rate by 25 Points

Georgia is starting to move away from the tightened monetary policy set by the National Bank of Georgia (NBG) in February 2014, with a decrease in the refinancing rate from 7 to 6.75.

The decision was made after a thorough look into the country’s macro-economic forecast. “According to current projections, it is expected that inflation will be below the forecasted figure in the coming quarters, which makes it possible to reduce refinancing rates,” said National Bank of Georgia’s President, Koba Gvenetadze. “Unless other factors affecting the economy occur, the monetary policy rate will be around 6 percent in the midterm period.”

As a result of a lower refinancing rate, people with loans in foreign currencies will have to pay less for their debt obligations. Last year there were more than 7,000 borrowers who had loans linked to the refinancing rate, reported the NBG.

For the past few months the Georgian Lari has remained steady at around 2.1 GEL for every USD, however it peaked this weekend at 2.34. “This fluctuating exchange rate has influenced the public and the currency they choose to borrow and save in,” said the NBG.

According to the figures, in June 2016 people in Georgia deposited 14.3 billion GEL into local banks but borrowed 16.4 billion GEL. The NBG reiterated that further changes to the monetary policy will depend on the inflation forecast, factors affecting inflation and the general state of the economy.

Eka Karsaulidze