The Georgian Lari (GEL) slipped to 2.7524 against US Dollar today, marking the record low in 2018. GEL was trading at 2.7383 against USD a day earlier.
The National Bank of Georgia (NBG) expects the fall to continue, forecasting GEL/USD rate at 2.7656 tomorrow.
During the first seven months of 2018, GEL rate was relatively stable, hovering around 2.4, but it started to slip the beginning of August.
GEL has depreciated by 14 Tetri against USD during the past months and by 30 Tetri during the past three months. The exchange rate GEL/USD stood at 2.6151 against U.S. dollar on 1 October.
GEL’s previous all-time low of 2.7846 per U.S. dollar was recorded on 22 December 2016.
National Bank of Georgia
In a statement released on November 6, NBG said that “exchange rate fluctuations are unrelated to economic fundamentals.”
“The current exchange rate dynamic is negatively affected by the environment surrounding presidential elections, which is reflected in the foreign exchange market. The National Bank strongly encourages public figures and experts to abstain from ungrounded statements and forecasts about the exchange rate dynamics to avoid the emergence of the misleading expectations,” the NBG said.
The central bank also said that its goal is to maintain the price stability in the medium term,” adding that “the NBG will use all the instruments at its disposal to avoid high inflation.”
On October 30, the NBG also released its monetary policy report, according to which throughout 2018, in line with the previous forecasts, inflation rate stayed around the target rate of 3%. Annual inflation in September 2018 was 2.7%. The bank explained that inflation is expected to remain close to the target for the rest of the year as well as in the medium-term. The Monetary Policy Committee of the NBG decided on October 24 to leave the policy rate unchanged at 7%. The NBG has not intervened on the foreign exchange market over the past period.
The opposition laid the entire responsibility on the government for GEL depreciation and the ruling party linked it to the upcoming New Year and economic situations in trade partner countries.
MP Roman Gotsiridze of the United National Movement said “the fate of the national currency is in the hands of the government and the National Bank,” adding that it is necessary to limit expenses and tighten monetary policy.
Parliamentary Chairman Irakli Kobakhidze made a brief comment on GEL depreciation: “We are working on this issue. I cannot speak about details here, but we all will see the results,” he noted.
Giorgi Gaganidze, Dean of the Faculty of Economics and Business of Tbilisi State University (TSU), supposes that one of the reasons of GEL depreciation is growth of imports and high demand for foreign currency, accompanied by “high political turmoil.”
Paata Bairakhtari, President of the Association of Young Financiers and Businessmen said that GEL depreciation was caused by reduction of exports, tourist flows and remittances.
TSU Professor Lado Papava linked GEL depreciation to tense political situation in the country. He called on politicians to refrain from making the statements directed at interfering in NBG’s activities. He also slammed the NBG of being “inadequate” in its statements.