NBG President Koba Gvenetadze says GEL devaluation is caused by the depreciation of Turkish lira, which created negative expectations regarding Georgia’s current account deficit. In addition, NBG President explains current fluctuation of lari exchange rate is likely to be excessive, correspondingly citizens or the businesses, who carry out foreign exchange operations can have a loss.
“I want to explain resent devaluation of GEL. Issues occurring in neighboring Turkey had a negative pressure on GEL. Turkey is our main trade partner and the exchange rate of their national currency always has impact on GEL. There is a very simple mechanism. Devaluation of the trade partners’ currency causes price decrease of their products. It affects our current account balance and the pressure continues until these products are not increased in price in our trade partner country.
But, do not forget that exchange rate volatility can be exaggerated. We had many cases in the past when the exchange rate depreciated due to the panic behavior and then returned close to the same level. In this case, if citizens or the businesses, who carry out panic foreign exchange operations, they will definitely suffer and it will not be the right decision,” said the President of the National Bank.
GEL exchange rate devaluated by 3.46 tetri, the official exchange rate shows that as of March 31, 1 USD costs 3.4464 GEL and 1 EUR costs 4.0426 GEL.
The NBG made intervention of 40 million USD last Monday. This was the fourth currency auction in 2021. This year, the NBG sold a total of 160 million USD.
Koba Gvenetadze explains that the NBG cannot oppose the impairment caused by fundamental factors through interventions, as it would be counterproductive.
“I confirm and announce that we will spend the reserves this year as well. But, if we try to change fundamental factors with these interventions, we will get back the higher inflation," said Koba Gvenetadze, President of the National Bank.
