Is the External Debt of Commercial Banks Risk to Georgia’s Economy?

Is the External Debt of Commercial Banks Risk to Georgia’s Economy?

access_time2016-02-16 17:50:04

Does a growing external debt of commercial banks pose  any risk to the country’s economy ?


Experts views diverged  on the subject.


In particular, an economist Temur Basilia says  that over the years the Georgian banking sector has accumulated a debt in the amount of  $ 2,7 bln, and in  the next three year the banks are to return 4.4 billion.


 "The  amounts do not coincide  as they show that debt servicing costs amounted to 50% of the total  debt and  corruption component is evident here.  However,  a decrease in the turnover of the national currency  is  a more serious problem.  When the loans in dollars were attracted , the exchange rate of the lari  was  set at 1.75 per one dollar, that is, $ 2, 7 billion  totaled GEL 4.6 billion  . While  today they will have to pay out  $ 4, 4 billion  and 11 million. The figures are not very convincing, despite the fact that this is the official information of the National Bank of Georgia "- he  notes.


The  expert Lia Eliava sees no risk  in  the commercial banks’ debt.


In  her words, the banks always lack the resources to work with, and so they prefer to borrow abroad as long as the economy takes the resulting resource. Regarding the impact of exchange rate devaluation of the national currency on the amount of debt, in her  opinion, the exchange rate fluctuations have formally increased the amount of foreign borrowing but the real growth in dollars is not so high.


Giorgi Tsutskiridze, CEO of the Association of Banks of Georgia,  does not see any risk in the growth of foreign borrowing either.


According to him, undesired  changes in interest rates  are the real problem in  managing bank assets and liabilities .



"As for the external debt of banks, it is  not a problem as long as they are able to pay them. Currently the  commercial banks don’t face  such a danger," – Tsutskiridze stresses.


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