Central Bank, Government to Share Responsibility for Inflation

The Central bank and the government will share responsibility if the one-digit inflation target is not met, according to a compromise agreement reached between lawmakers and the government.

The head of the central bank will not automatically be dismissed if the 18-month inflation rate reaches 12%, according to the draft law which was passed with its final reading on March 14.

The document also outlines that Parliament, if the target is missed, can recommend that the president dismiss the central bank chief. Parliament will also have the right to raise the the cabinet’s responsibility if the inflation target is missed.

The initial version of the draft, which was proposed by the government, envisaged the automatic dismissal of the central bank chief if annual inflation reached 12% – opponents perceived the provision as an attempt to institutionally downgrade the Georgian National Bank’s role.

The law also envisages that there should be no more than nine members in the central bank’s board. Foreign citizens will also have the right to take a seat on the board. The president and vice-president, however, must be Georgian citizens.

The draft law was part of a comprehensive government-proposed economic package.