No Fundamental Macroeconomic Basis for Significant Devaluation of Lari

“There is no fundamental macroeconomic basis for the significant depreciation of the Georgian Lari. The economic data that we have today gives no basis for the significant devaluation,” declared the Chairman of Budget and Finance Committee, Irakli Kovzanadze. 

Kovzanadze points to the fluctuating exchange rate regime in Georgia. The rate is defined by the demand and supply of the market. This means that movement can take place in both directions. 

Throughout the summer, we saw the GEL strengthening. In recent months, in order to avoid further strengthening of GEL, the NBG bought $110 million US dollars, increased FX reserves and managed to maintain monetary stability in the country. 

“The recent depreciation of GEL could be explained by both expectation as well as psychological factors. At the end of August, when the exchange rate was slightly depreciated, this was a sign for those who were expecting relatively low exchange rate in August to buy foreign currency, which increased demand and was reflected on the exchange rate. I would like to point out again, that nowadays, there is no fundamental macroeconomic basis for significant depreciation of GEL. Accordingly, the fluctuation of the exchange rate is temporary and tends to be short-term”-said Mr. Irakli Kovzanadze.