Georgia's foreign exchange reserves increase

Finance Materials 13 January 2021 15:19 (UTC +04:00)
Georgia's foreign exchange reserves increase

BAKU, Azerbaijan, Jan.13

By Tamilla Mammadova – Trend:

Georgia's foreign exchange reserves increased by $404 million in 2020 and as of December 31, they reached $3.9 billion.

The volume of reserves increased despite the National Bank of Georgia (NBG) sold $873 million for the national currency stabilization.

In 2020, the National Bank made a total of 26 currency interventions to mitigate the fluctuations of the lari exchange rate. The reserve increase was due to the foreign debt of $1.5 billion attracted by Georgia during the crisis.

Meanwhile, $873 million was spent on interventions in 2020, which was far more compared to the previous foreign exchange auctions conducted in any other year. For example, during the 2016 crisis, the NBG sold $280 million through auctions, 2015 - $287 million, and 2014 - $300 million.

Despite the interventions, the national currency continued to fluctuate. Lari exchange rate depreciated sharply in 2020 during the first wave of the coronavirus pandemic. On March 1, $1 made up 2.79 lari, within two weeks $1 became 2.99 lari. On March 27, 2020, the lari reached its peak devaluation and $1 totaled to 3.48 lari.

To reduce such impairment, the National Bank held three foreign exchange auctions and sold $100 million. Panic trades stopped late in the month, as the government announced the anti-crisis plan and donors’ assistance. These messages reduced the cost of $1 to 3.15 lari.

In June, the lari strengthened and $1 became 2.95 lari. Soon the exchange rate depreciated again due to changed expectations about tourism, as borders did not open in accordance with the announced plan.

Since September, lari fluctuations have increased even more. At the same time, it became clear that the second wave of coronavirus was brewing in the country, which could be followed by the repeated "lockdown". During this period, the National Bank intensified foreign exchange interventions and sold $500 million in the fourth quarter of the year.


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