According to Archil Mestvirishvili, Vice Governor of the National Bank, foreign currency lending in Georgia is growing at a higher pace than would be optimal for the economy. According to his explanation, foreign currency loan flows are accompanied by exchange rate risk, which helps to maintain the dollarization, making it a macroeconomic risk for the country.
Despite this, the vice president does not specify whether the NBG will use the instrument at its disposal, including means of increasing the foreign currency reserve norms for banks. According to Archil Mestvirishvili, in this regard, the National Bank will continue to monitor the rate of lending.
Currently, the maximum reserve rate on funds raised in foreign currency is 25%. According to NBG, it could increase to 30%-40%.
“When we tightened monetary policy, it led to faster growth in foreign currency lending than what would have been optimal for borrowers. We now see the risks of foreign currency loans growing faster than the optimal rate.
With our monetary policy report, we look at lending to the economy and think about increasing reserve norms. We are observing how lending will continue during these months, then we will make a decision.
The decision to increase reserve norms has not been made yet. It will depend on how lending grows and also on how the interest rate is increased by the FED, which is transmitted to the Georgian market.
We have discussions with the sector all the time and they present and talk about the various impacts that may arise. You remember at the end of 2018 when there were important decisions about responsible lending. This was preceded by many months of discussions with the banking sector," said the vice-president of the National Bank.
