Georgian National Bank takes measures to curb depreciation of lari
Baku, Azerbaijan, September 27
By Tamilla Mammadova – Trend:
The National Bank of Georgia decided to carry out another intervention in the currency market to restrain the depreciation of the Georgian lari and avoid the risk of further inflation, Trend reports citing the National Bank of Georgia.
"To enhance the impact of tightened monetary policy, the National Bank will sell $40 million at a foreign exchange auction on September 27," the regulator said in a statement.
At the same time, the statement notes the current level of the nominal effective exchange rate still creates significant inflationary pressure.
"The National Bank will consistently use its existing instruments to maintain price stability," the regulator assured.
The National Bank carried out a previous intervention on August 1 when $40 million was auctioned, with a selling price of $32.8 million. After the auction, the official rate of the lari strengthened by 1.4 percent.
On Thursday evening however, the official rate of the Georgian lari fell to a historic low: on September 27, the National Bank set the rate at 2.9808 lari/$1 dropping from 2.9737 lari/$1 on September 26. Thus, the lari has already depreciated by 10.3 percent since the beginning of the year, while the current exchange rate is 10.8 percent lower than Georgia’s 2019 budget indicator of 2.66 lari/$1, directly affecting the growth of consumer prices in the country.
In order to neutralize inflationary pressure caused by the fall of the lari exchange rate, the National Bank of Georgia's Monetary Policy Committee decided, at an extraordinary meeting on September 25, to raise the refinancing rate by 50 basis points to 7.5 percent per annum.
The Georgian national currency was introduced on October 2, 1995 with a rate of 1.3 lari/$1. As of January 1, 2019, the exchange rate was 2.6727 lari/$1.