GEL Goes Up

ID will be necessary to exchange currency

The Georgian Lari rose this month against the US dollar and was trading at $1.8 as of August 30. This is the highest level of the Georgian Lari (GEL) against the USD for the last three years.

The GEL has also rose against the Euro, dropping from 2.7 to the current 2.17 since January this year.

Officials say that the process of the decrease of the shadow economy and a budgetary surplus, which enabled the government to increase budgetary revenues by 200 million Lari, are the main reasons for the strengthening of the Georgian currency.
 
“This is caused by current positive economic processes in the country and assumptions that it is caused by interference from the government are ungrounded,” Irakli Managadze, President of the Georgian National Bank, said in an interview to the Georgian daily 24 Hours on August 17.
 
Expert Lado Papava, former Minister of Economy in the country, also says that the demand for Lari has increased in the country after the improved tax collection process.
 
Papava says that recently the foreign currency supply has also increased on the Georgian market as well. This is basically caused by the construction of the Baku-Tbilisi-Ceyhan oil pipeline in Georgia, as well as by the privatization process.
 
“This is a process, when an investor periodically converts foreign currency into Lari in order to make investments,” Lado Papava told Civil Georgia.
 
Irakli Managadze also said that much has changed for the better in the monetary sphere recently; particularly the funding of budgetary expenditures has significantly improved, as well as the government repayment of salary and pension backlog.
 
However, the chairmen of the Parliamentary Committee for Finance and Budgetary Issues Roman Gotsiridze says, the strengthening of the GEL has already reached “a critical point.”
 
“The GEL’s further strengthening may bring negative results on the currency market,” Roman Gotsiridze told Civil Georgia.
 
“The National Bank will never permit an extreme fluctuation of the Georgian currency,” Irakli Managadze said.
 
He said the National Bank has not defined any particular rate to fix the Lari rate. “Everything depends on the free currency market,” Managadze added.

Roman Gotsiridze said that most likely the GEL rate will start to slightly fall starting in September.

Meanwhile, starting in September, a person willing to exchange currency in Georgian will have to submit their ID. The initiative was proposed by the Financial Monitoring Service of the National Bank of Georgia, which oversees anti-money laundering measures in the country. 

Officials hope that this measure will help them to fight money laundering; however, experts are rather skeptical.

“There are many other better measures rather than submitting IDs at the currency exchange centers in order to fight money laundering. This process may even foster increase of robbery cases, as it has happened in Russia, where this novelty already is enforced,” Lado Papava says.