BAKU, Azerbaijan, April 1. The recent decision made by the National Bank of Georgia (NBG) regarding the refinancing rate was a forced one, to fight high inflation in the country, Giga Bedineishvili, a Georgian economist and professor at the Free University of Tbilisi, told Trend.
The NBG on March 30 raised the refinancing rate by 0.5 percent to 11 percent. The previous rate increase occurred in December 2021, when the regulator also raised the rate by 0.5 percent - to 10.5 percent.
Bedineishvili noted that the increase in the refinancing rate will slow down the growth of the Georgian economy, however, in the long term, there are no significant risks.
“The country needs to radically change its monetary and fiscal policy in order to cope with rising inflation, as well as reduce the budget deficit and the cash supply in circulation,” Bedineishvili added.
The head of the Center for Analysis and Forecasting of Tbilisi State University, economist Vakhtang Charaia also noted that the price increase in Georgia after the coronavirus pandemic has now worsened even more after the outbreak of hostilities in Ukraine.
“The NBG tries to influence the overall inflation by increasing the refinancing rate, however, it is impossible to influence the increase in world oil prices, as well as food products such as vegetable oil and wheat,” Charaia said.
The economist noted that in order for Georgia's economy to become more complex and diversified, it is necessary that other financial institutions, such as the Ministry of Finance and the Ministry of Economy, carry out comprehensive reforms jointly with the NBG.
Both economists outlined that there is no prospect of price cuts in the country in the near future, and there are also very few tools to influence this process.
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