Georgian lari hits record low against euro

Over the course of the past week, the lari has weakened by seven tetri against the dollar and has hit a record low against the euro: the official exchange rate has dropped to three lari per euro.

The president of the National Bank Koba Gvenetadze however, is inclined to believe that the current rate will be short-lived: “It’s impossible to comment on the short-term volatility of the exchange rate.” He says that the main economic indicators of the country have improved, and a number of factors have affected the exchange rate, including market expectations.

Gvenetadze also emphasized that the exchange rate of the national currency is floating, and that such a currency is characterized by frequent periods of strengthening and devaluation.

Reflecting on internal and external factors that have, this time around, lead to the devaluation of the lari, the authorities and independent experts have named a number of reasons for what is happening.

First: expectations related to the elections

“In Georgia, there is a theme of the lari losing strength after elections and the dollar gaining in demand,” says expert Levan Kalandadze.

Another reason for the devaluation is the season

Because Georgia is a country that is oriented towards import, importers in November are trying to beef up their reserves.

As a result, in autumn they receive more currency than usual.

A number of experts and the opposition have explained the fall in the exchange rate as a misguided policy of the government and point out the necessity of changing the monetary policy.

The devaluation of the lari is being actively discussed on social media:

“I am afraid of every new day.”

“The president of the National Bank feels too lazy to explain the reasons for the fall in the exchange rate of the lari, and I have to give away my entire salary to pay off credit interest.”

“The elections are over, and now they’ll be raking in money until the next elections,” write Facebook users.

• In October 1995, the lari was officially announced as the only legal currency in the country. On 25 October 1995, the official exchange rate was 1.3 lari to the dollar.
• The Georgian lari has a floating exchange rate. This means that the exchange rate is not fixed and is not regulated by the government nor by the national bank.
• A new wave of depreciation began in the fall of 2016, when the exchange rate went from 2.28 lari to the dollar to 2.78 to the dollar on 22 December.
• In the beginning of 2017, the state tried to stop the devaluation of the national currency, launching a program of ‘larisation’, which increased the role of the lari in the national economy. This was especially noted in loans and credit. Generally, banks give out credit loans denominated in lari.