The FINANCIAL – (Tbilisi) Georgian Lari devaluated by 0.16 against dollar from Friday to Monday. In the same two days lari depreciated by 0.21 against Euro. Lari’s rate reached a new equilibrium point which is 1.65 and as Amaglobeli said there is no need for additional corrections from the bank’s side.
It looks like the commercial banks must have got the information on Friday that NBG was going to make changes, but they didn’t know how big these changes would be. For this reason on Monday morning in banks dollars selling price was 1,71-75,while euro was 2,23-35. At that time the NBG had the official exchange rate of GEL at 1,49 with dollar.
On Friday the exchange rate that commercial banks and NBG had was the same. 1 USD equaled 1.4400 GEL. On Monday USD hit the record by equaling 1,71-75 GEL at commercial banks. After NBG made official announcement about correcting lari’s fixed rate at 1,65 against dollar, commercial banks lowered foreign exchanges too. Spokeswoman for NBG told FINANCIAL commercial banks were expecting GEL rate at 1.80 against USD.
David Amaglobeli, NBG’s President said that GEL rate would be fixed at 1.65. The problem was that those traders who bought USD or EURO between 11.00 and 2 p.m could have lost difference between record rate and the rate fixed by NBG.
Financial losses of local companies holding main assets in Georgian national currency are more than 10 % of the amount.
During the past 8 years the lowest rate of USD in Georgia was fixed at 1, 39, that was in July 2008, month before Russia’s military invasion in Georgia.
It’s interesting that the rate of USD against GEL was 2.20 on the day of Rose Revolution (23 November 2003).
The same 1.65 rate that NBG reached today was fixed last year in October 2007.
“We killed the expectations for lari’s further devaluations. There is no need for individuals from private and public sectors to transfer their assets into other currencies. The National Bank will guarantee the exchange rate stability,” David Amaglobeli, President of National Bank of Georgia, told The FINANCIAL.
As the NBG representative said on Friday last week it had already made a decision to intervene and correct the lari’s rate.
“In NBG’s opinion this change will not have negative influence on inflation in Georgia because there are no economic means for price rises. We suppose that some private traders will take advantage of the current situation and will raise the prices on product. If in July lari’s exchange rate with Euro was 2.22 today this rate is 2.12 .So the product prices imported from Europe shouldn’t rise.”
“In the long run there are no economic reasons for lari’s sharp devaluation. Starting from July on world financial markets there was a strengthening of dollar’s value in comparison with majority of other country’s currencies. The NBG tried to hold the fixed rate of lari with dollar to avoid further difficulties,” said Amaglobeli.
According to the central bank the annual inflation rate by end-October slowed to 7%, down from 10.6% in September.
“There were two options for the correction of lari’s rate. The first option was to make changes step by step. The other was to have rate changes at once. We chose second because step by step changes have two negative consequences: fast dollarization of the economy; second is raising doubts in market’s economic agents as they don’t know when this process ends and amount of investments fall,” commented David Amaglobeli .
“We were waiting for the right time for correcting the exchange rate. We didn’t want it to be connected with any negative economic shifts. It had to occur on Friday so that major shifts would happen on Saturday-Sunday and fewer problems would be created for businesses.”
“I would advise the general public not to pay attention to the changes in lari’s rate. If they don’t want to lower their well being, they shouldn’t think of monetary speculations. Changing money from one currency to another can have bad results. Take loans in lari and make deposits in laris.”
“NBG’s politics entails promoting stability on exchange market. We have enough resources for it. Our exchange reserves are 1 150 000 000 USD. In the next several days we will receive 250 million USD from USA as aid,” noted Amaglobeli.