“There is no reason for panic. The
National Bank has used all the available leverage to reduce inflationary pressures that will surely reduce
inflation, ”Koba Gvenetadze, President of the National Bank of Georgia, says.
According to him, the excessive devaluation
of the national currency is the main reason for inflation.
“Russia’s travel ban raised negative
expectations about a sharp reduction in foreign exchange revenues in the country. Expectations play a very
important role in shaping the exchange rate. The tourist flow from Russia
decreased by 13% in July and 11% in August, the annual revenues remained at the
same level and did not grow. However, the current level of devaluation does not
correspond to economic indicators but still has a serious inflationary pressure, for this
reason the National Bank decided to use its levers to influence the situation,
” Koba Gvenetadze notes.
In particular, the refinancing
rate was increased, currency interventions were carried out in the market, the
required reserve for loans in foreign currency was cut from 30% to 25%.
“The banking sector now has an
additional opportunity to issue loans in foreign currency and meet demand. Last
year, we increased the requirement for compulsory reservation, and reduced the
risks to financial stability due to a very high level of dollarization in the
economy,” President of the National Bank explains.
Gvenetadze believes that the use of the
instruments should be rational and consistent with the risks facing by the
“External shocks can occur any time, but
the main thing is to cope with them. They can’t be forecasted, but can be neutralized for a certain period. Now there is
no reason for panic - we are actively working with the government, and I’m sure
that the right macroeconomic approach will certainly bring corresponding
results, ” President of the National