10.Feb .2022 18:30

Why Is GEL Strengthening? – Irakli Kovzanadze’s Explanation

Why Is GEL Strengthening? – Irakli Kovzanadze’s Explanation
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Irakli Kovzanadze, Chairman of the Budget and Finance Committee names several factors which have an impact on the strengthening of the national currency, including rapid economic recovery, tightened monetary policy rate, reduced money supply (M2), as well as a sharp increase in exports and remittances.

“GEL exchange rate keeps a strengthening trend, but its steadiness is not the result of an instant occasion or one-time action. Several circumstances created the basis for GEL strengthening:

• Double-digit economic growth (10.6%)
• NBG’s tightened monetary policy (from 8% to 10.5%)
• Reduced money supply (M2) by over GEL 700 million in January
• Sharp increase in remittances, export growth.

Since the level of dollarization is high in our country and the economy is greatly dependent on imports, depreciation of GEL is directly transmitted to the prices, which is reflected in inflation. Accordingly, GEL strengthening in turn will have a positive effect on inflation reduction.

As an economist and financier, I want to note that from a long-term macroeconomic point of view, the value of GEL strengthening is higher than its impact on inflation," said the chairman of Chairman of the Budget and Finance Committee.

As of February 8, cost of 1 USD made up 2.91 GEL in the Bloomberg trading system, this exchange rate is the strongest, since GEL has seen after 2020.