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Eric Livny: Larization Program Cannot Ensure Economic Growth

Larization program cannot make influence on economic growth, ISET economist Eric Livny told the Business Contract. Restrictions of USD-denominated transactions will not bring positive effects. In several months GEL exchange rate will strengthen and in this case consumers should have option to choose which currency to use for transactions, he said.

“Government has tried to treat GEL exchange rate sharp depreciation with responsibility. Government’s response comprises two components: making LARI more attractive and making LARI cheaper in business transactions. This part is quite positive. This is good for monetary policy, as well as for national bank potential to strengthen the state economy.

At the same time, I believe that other components such as making USD more expensive and restricting USD-denominated transactions will not bring positive effects. In several months we expect GEL exchange rate to strengthen and consumers should be able to choose which currency to use for transactions. This freedom must not be restricted. Neither NBG nor Government have clear position on this issue. I would suggest them not to be hasty, because both of them may commit mistakes.

Larization is both social and economic project. Banking sector is one of the most profitable segments in Georgia. If banks take arbitrary decisions, then banking products will grow in value, while expensive loans cannot tackle problems”, Livny said.