Hope Again: Georgian Lari Regaining Value
The recent plummet in the value of the Lari against the US Dollar has caused a lot of anxiety among locals, travelers and business people alike, but after an uncertain few weeks the Georgian Lari is finally regaining its worth. The National Bank of Georgia has set a new exchange rate, according to which, the Dollar price is, at time of going to press, GEL 2.5405.
Starting from today, 1 USD will cost 2.5405 GEL, as for the euro its exchange rate is 2.9980 GEL. This is an improvement on the rate one month ago on 18 December of 2.7268 GEL, and the value of the Lari is only set to increase.
Georgia’s currency experienced a frightening dip in value last winter too, reaching an historic low of 2.78 to the dollar. The official reason for this last year was “external shock;” problems with the economy in the region and neighboring countries. This year, the National Bank of Georgia representatives and the government say the drop was caused by false expectations of society.
The depreciation seemed to accelerate after the municipal elections on October 21. The day before, on October 20, the Lari was 2.48 to the Dollar and by November 21 it had reached 2.72. Opposition parties made accusations about retaining an artificial exchange rate during the runup to the elections.
Economic expert Levan Kalandadze said that the Lari losing value around elections is a regular occurrence. “In Georgia, there is a theme of the Lari losing strength after elections and the dollar gaining in demand.”
On November 2, the NBG released a statement explaining that the devaluation was temporary and caused by false expectations of the public that the Lari would lose its value. “The expectations had an influence on the national currency in the short-term perspective only,” the bank wrote on the anxiety around buying foreign currency because people are afraid of the devaluation of their own.
Despite the expectations being high, there was no grounds for it. The bank stressed that the mid-term and long factors only had positive influences and the tendency would only continue into next year.
“Based on September data, incomes from solid export and tourism has risen about 30 percent and remittances have increased by 20 percent,” the bank stated.
NBG representatives said that they were working hard and maintaining good communication with the government to avoid any threat of high inflation.
The NGB president Koba Gvenetadze emphasized during the devaluation that the Georgian currency is characterized by frequent periods of strengthening and devaluation. Its exchange rate is “floating”, meaning it is not regulated by the bank or government.
In 1995, the Lari was announced as the only official currency of Georgia. Back then, the official exchange rate was 1.3 to the Dollar.
In the beginning of this year, the state tried to stop the devaluation of the currency by launching something called ‘larisation’, in which the role of the Lari in the national economy was increased. Notable in this action was loans and credit. Banks gave out loans denominated in Lari.
Tom Day