Despite a central bank intervention on Thursday, the Georgian national currency lari (GEL) fell to 2.1472 to the U.S. dollar, its lowest level since January, 2004.
The National Bank of Georgia (NBG) said it sold USD 40 million at a foreign currency auction on Thursday – its second intervention this year after the central bank sold the same amount of dollar on February 11 and also raised its key rate by 50 basis points at 4.5%. At the time the measures helped to halt GEL slide, but only briefly, and it then again continued depreciation.
Since early November, when GEL started depreciation, the Georgian national currency lost 22.4% of its value against U.S. dollar and 10.9% against euro.
Commenting on the issue, Economy Minister, Giorgi Kvirikashvili, told journalists on February 19 that the government intends to ask IMF for “additional funds for capital spending that will be used for infrastructure projects.”
Georgian exports continued downward trend in January, declining 30% year-on-year. The government has attributed decline mainly to decreasing exports to Russia and Ukraine. Remittances also continued declining in January to USD 75.5 million, down by 23.3% compared to the same period of last year, caused by falling transfers from Russia.
As lari falls, the government is under increasing criticism of the opposition with UNM parliamentary minority group blaming economic policies of the government as the latter tends to blame mostly external factors for GEL depreciation. UNM has been calling on the government to give up imposing additional regulations and to cut income and value added taxes, as well as to scrap excise tax on fuel to stimulate economic growth in a longer term.