Interest Rates on the Lari-denominated Loans Growing

access_time2017-12-07 12:23:56

Interest rates for loans in national currency are constantly growing – the National Bank reports that  as of October 2017, the base rate for loans in lari was 16.6%, whereas in 2016 - 13.8%.


The average interest rate on loans in national currency has increased from 17.5% to 21.4% from October 2016 to October 2017. Interest rates on loans  for individuals are also relatively high and total  26, 2%, while in the same period of 2016 - 24, 1%.


At the same time, interest on loans in foreign currency is getting cheaper - in October 2017, the interest rate averaged 8.2%, whereas in 2016 - 9.2%.


According to the financier Irakli Berdzenadze, such an  increase in interest on loans in national currency is caused by  several factors - the unstable environment, the high cost of resources in the national currency and the larization program.


"The program aimed  to  increase  the competitiveness of the national currency against  the dollar and to strengthen its rate. But as it turned out, targets were not met. In the National Bank wanted to achieve a preferential position of the lari, it had to  introduce not only a ban on issuing loans in foreign currency for less than GEL 100,000, but also on deposits. Then depositors would have to transfer their deposits into lari, and banks would have a cheap resource," he explains.


In Berdzenadze’s words, refinancing loans issued by the National Bank at a fairly high percentage are today the only source of receiving funds in the lari. 


 "In the end, it turns out that banks have no cheap lari, so they have to increase interest. The bank, which attracts amounts at  9-10%, will lend at least at 16%, " the financier says.


In all countries where refinancing loans are cheap - interest rates on loans in national currencies are also low, Berdzenadze notes.


"In Chile, the refinancing rate is 2, 5%, in Britain 0, 5%, in Hungary 0.9%, in South Korea 1, 5%, in Australia 2%, in Poland 2, 5%, etc that makes loans in these countries cheaper. In Georgia, banks get resources  in lari at a high price and are forced to lend out money at a high price, "Irakli Berdzenadze stresses.

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