Economist Giorgi Khishtovani has questioned the National Bank of Georgia’s (NBG) policy of accumulating foreign-exchange reserves while inflation remains above the central bank’s 3% target. Speaking to BMG, Khishtovani argued that the NBG’s priority should be price stability rather than maximizing reserves, which have reached $8.14 billion, including around $1 billion in gold reserves. He said the central bank has purchased more than $3 billion from the economy since the beginning of the year, and suggested that slower reserve accumulation could allow the lari to strengthen and ease imported inflationary pressures.
Khishtovani said the NBG’s interventions are preventing the lari from appreciating despite what he describes as an excess supply of foreign currency. According to the economist, reducing monthly foreign-currency purchases from around $500–600 million to a lower level could create conditions for the lari to strengthen toward GEL 2.1–2.2 per dollar. He argued that a stronger lari would reduce the cost of imported goods and help lower inflation. The NBG, however, has said that reserve accumulation is one of the factors supporting the stability of the national currency and the wider economy.
The economist also linked the reserve-building policy to the government’s fiscal position, arguing that higher inflation increases nominal tax revenues and makes it easier to meet budget targets. He cited the government’s reported 9% year-on-year growth in tax revenues during the first eight months of the year, compared with a 6.5% target. Khishtovani said that, in his view, maintaining a weaker exchange rate and higher inflation comes at a cost to households, while also benefiting the government through a larger nominal tax base. These claims represent his assessment of the relationship between monetary and fiscal policy.
Khishtovani acknowledged that foreign-exchange reserves are important in the event of external shocks and currency pressure, but argued that the appropriate level of reserve accumulation depends on economic conditions. He said that if inflation were closer to 2–3% and price pressures were less significant, he would support accumulating more reserves. “The issue is not whether accumulating reserves is good or bad, but how much should be accumulated and under what conditions,” he said, arguing that the NBG should give greater weight to price stability while determining the pace of reserve purchases.
