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GEL Devaluation

Economist Assesses Georgia’s Devaluated Economy in 2015

The GEL exchange rate depreciation is considered a main economic event in 2015. Until October 2015, the national currency was volatile and vulnerable to devaluation in relation to both EUR and USD. The GEL devaluation process broke out in autumn 2014. In the end, the national currency volatility period ended in September 2015 and since then the currency maintains stable exchange rate.

At the initial stage of the GEL depreciation, the Government was urging the National Bank of Georgia (NBG) to apply the monetary leverages and intervene in the currency market. The NBG, though, was referring to the decreased foreign currency inflows and it was shifting the responsibility onto the Authorities.

Naturally, it is upon the Government to draw investments, grow exports and ensure foreign currency inflows, but the NBG is an only state body that keeps leverages for making direct influence on the currency exchange rate. Only the central bank owns leverages for making interventions in the currency markets to ensure the exchange rate stability, but the NBG refused to apply them and referred to expected squander of the currency reserves and negative aspects of the tightened monetary policy.

As a result, throughout the year, amid reciprocal accusations, the GEL exchange rate continued falling, and none of these state segments has changed the policy. Following the disputes for several months, the NBG and the Government came to a single position and named external factors behind the national currency devaluation. As a result, both structures have escaped the responsibility.

Merab Janiashvili