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National Bank Expects the Exchange Rate to Stabilize in the Near Future

The exchange rate of the national currency will stabilize in the nearest future – Giorgi Kasagidze, President of the the National Bank of Georgia, states.

According to him, the devaluation of the national currency in recent weeks was  largely caused by   the negative expectations that have arisen due to the economic crisis in neighboring countries.

“Unlike the year of  2015, the lari depreciation has  not  been caused by  a trade deficit.  This  factor is already largely reflected in the rate  of 2.4  per dollar while imports decreased to such an extent that the existing income in foreign currencies allows to balance trade deficit. The second factor that may contribute to the devaluation is the money supply. As you know, the National Bank limited  the money supply and reduced it almost to zero. Accordingly, this factor also has no significant effect on the exchange rate,” Giorgi Kadagidze explains.

According to him, for this reason  the National Bank carries out preventive point actions and there is every reason to believe that the Georgian lari will  begin to stabilize  in the near future.

“If the pressure on the national currency still remains, it is possible the monetary policy will be tightened. It must be borne in mind that monetary policy is not a unique recipe and its tightening has negative consequences for the turnover, private business assets and leads to  a reduction of economic growth. Therefore, it is very important  to coordinate  this issue with the government,” NBG President  notes.