Georgia’s national bank doesn’t rule out possible increase in interest rate

Georgia Materials 23 February 2015 17:52 (UTC +04:00)

Tbilisi, Georgia, Feb. 23

By Nana Kirtzkhalia - Trend:

Georgia's national bank is ready to join the process of strengthening of the rate of the national currency, lari, but this will be painful for the population, the bank's president, Giorgi Kadagidze told the Rustavi-2 TV channel.

He said that even more monetary policy tightening will damage the economy, reduce the availability of bank loans, and the interest rates on them will increase further.

"There are direct signs of an economic shock. The remittances, tourism and export have reduced. All this is reflected on the lari," said Kadagidze.

"We have three goals - the financial provision, increasing the prices and the help to those people, whose loans, as a result of these processes, became significantly more expensive," he added.

"The financial stability will be ensured," Kadagidze stressed. "This is our mandate, and we have repeatedly proved that we are capable of this. We daily monitor the prices, and if needed, we will intervene in the extent which is necessary."

He added that the intervention would constitute the reduction in money, that is, the interests on credits will increase, and loans will become less available.

Georgia's national bank decided on Feb. 11 to raise the refinancing rate by 0.5 percentage points to 4.5 percent. The need for this decision was due to the rising inflation risks.

The bank's next meeting on the refinancing rate is scheduled for March 25.