Georgian lari continues to tumble – 3.00 new record low

The exchange rate of the Georgian national currency has sunk to 3.00 lari to the dollar in the country’s two largest commercial banks.

As of July 31, both TBC Bank and Bank of Georgia have listed the buy rate at 3.015 GEL per 1 USD. 

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From October 1995 until today, the Georgian national currency has never depreciated this far. The first depreciation of the lari began at the end of 2013. Then, 1 dollar cost 1.66 GEL.

Why is the lari depreciating

Experts, the opposition and the government have all put forward different causes for the depreciation. 

Government officials have said the protest demonstrations held after June 20 before the parliament are the reason for the depreciation of the lari and also name other external factors [ed. starting June 20 and continuing today, protest demonstrations have been held every day in front of the Georgian parliament, demanding the resignation of Interior Minister Giorgi Gakharia. The police dispersed the first rally by force]. 

Parliament Speaker Archil Talakvadze blames the opposition for the lari’s devaluation.

“The destabilization and organization of violence by certain political groups is directly directed against the state and the well-being of citizens, the economy and security,” said Archil Talakvadze.

The president of the National Bank, Koba Gvenetadze, said that the lari depreciation is associated with an “external shock” and one of the significant factors is the reduction in the number of tourists.

On July 8, Russian President Vladimir Putin’s ban on flights from Russia to Georgia came into effect, drastically reducing the flow of Russian tourists to Georgia.

Gvenetadze says the way out of the situation is to continue the process of dedollarization.

“Today Georgia is going through an external shock. The expected number of tourists arriving in Georgia has decreased. This naturally affects the exchange rate. Since shocks are always the expected direction, dedollarization is important. In the event that one’s income is in the national currency, loans should also be issued in the national currency”, says Gvenetadze

The opposition and experts say that the current wave of the lari’s depreciation is directly related to events surrounding TBC Bank – its founders have been accused of money laundering almost $17 million back in 2008 – as well as the decrease in the number of investors in the country and the fact that the government “has no economic policy.”

According to Levan Koberidze, an independent MP, blaming the lari’s depreciation on the demonstrations in front of the parliament is irresponsible and can’t be taken seriously. 

“The lari has steadily depreciated throughout the year. The process has intensified since May, when at the beginning of the month the rate was 2.7, and at the end of May it was already 2.8. In the month of May alone, the GEL depreciated by 10 units, where were the events on June 20 then?”, says Koberidze.

Koberidze says the political situation is affecting the rate of lari, but this is not the most important thing:

“The government has no economic policy,” Koberidze said.