A high level of dollarization is recognized as one of the greatest challenges of the Georgian’s economy. However, no one knows what to do with it, as there is no answer to the question of whether lending in foreign currency should be prohibited in the country at the state level?
The expert Temur Basilia believes that the only solution is a legislative ban on all cash transactions in foreign currency, including lending.
"This principle operates in many countries, including developed," - says the expert.
In different countries, the problem is solved in different ways.
For example, in Germany loans in foreign currency are not banned - any customer can come to the German bank and take a loan in dollars, but this type of loans are not popular among the population because of the possible fluctuations of the euro against the dollar.
According to the expert Vazha Kapanadze, Georgia should not prohibit loans in foreign currency, but the National Bank may restrict them.
"It is clear that the rate of dollarization in Georgia is very high, and has further risen in the last year and a half due to the devaluation of the national currency. Many depositors shifted deposits in local currency into dollars, as a result, the dollarization of savings of citizens has increased from 50% to 70%. This is a very high figure, which shows that the lari is suffering a pressure from the dollar. In 2014, according to preliminary calculations, the citizens spent GEL 1 billion on the purchase of dollars. What can be done to reduce the dollarization of deposits?
First and foremost, the National Bank should set a higher percentage of reservations for foreign currency that will eventually lead to an increase in the interest rate for loans in dollars and euros stimulating by this lending in the lari. In such a situation, lending in the national currency would have been more profitable for banks. However, the National Bank has not taken this step considering the interests of the commercial banks. The banking sector received a large profit on the difference in rates of purchase and sale of dollars and became rich at the expense of small and medium-sized businesses and individuals, "- the expert stresses.
He notes if restrictions are imposed on the dollar lending, customers will have no choice but to make loans in the national currency.