Central Bank to Control GEL via Auctions

Rate of Georgia’s national currency, Lari, will be determined through currency auctions, instead of central bank’s interventions on the Tbilisi currency exchange, Giorgi Kadagidze, the President of National Bank of Georgia, said on May 25.

“The National Bank of Georgia has decided not to intervene any more in Tbilisi’s currency exchange and to carry out currency interventions only through currency auctions. As a result from now on, an official Lari exchange rate will be determined through currency auctions,” Giorgi Kadagidze, the President of National Bank of Georgia, said at a news conference.

“The move, we think, will help further development of the Georgian currency market and will make the central bank’s monetary policy more flexible. It does not mean change of our policy and the National Bank will carry out necessary interventions to secure stability of the national currency,” he added.

In late March, IMF executive board welcomed the Georgian authorities’ plans to move to foreign exchange auctions “as an important step to achieving greater exchange rate flexibility and protecting international reserves, which are relatively low.” Also in March IMF noted that “the real effective exchange rate is overvalued.”

“Over the medium term, the authorities’ commitment to exchange rate flexibility and structural reforms to enhance competitiveness should help correct the overvaluation, and reduce vulnerabilities posed by the large underlying current account deficit,” IMF said.

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