The recent further weakening of the Georgian currency, lari (GEL), is a result of a “stir” caused by statements by “irresponsible experts and politicians”, who predict even more depreciation of the GEL, PM Irakli Garibashvili said at a government meeting on Tuesday morning.
Georgian currency lari (GEL) lost 1.3% of its value, falling to 2.364 per U.S. dollar on Monday, the biggest single-day drop since early March, 2015, according to central bank’s official exchange rate set for Tuesday. Exchange kiosks in Tbilisi were selling dollar for about GEL 2.4 as of Monday evening, up from 2.34-2.35. GEL further weakened as of Tuesday afternoon and U.S. dollar was sold for about GEL 2.43-2.44 at exchange kiosks in Tbilisi.
Economy Minister Giorgi Kvirikashvili said at the government session on Tuesday morning that country’s macroeconomic parameters showed “external shocks” that had downward pressure on GEL, involving falling external earnings from exports and remittances, have already been “completely offset”, including by declining imports. Therefore, Kvirikashvili continued, this recent depreciation was a result of “speculative transactions” and “stir” among market participants.
“There are all the reasons to believe that those market participants, who will get involved in these speculative transactions they will eventually lose [money],” he said.
PM Garibashvili said after remarks from the Economy Minister: “We can conclude that we are facing an obvious speculative [trading] and stir; that’s emotional-psychological factor. I want to tell the population not to yield this emotional-psychological stir.”
“What is important now is to keep calm; nothing special is going on from the macroeconomic point of view… We have no fundamental problems at this stage. That’s clearly a stir, which should be removed and it will be removed sooner or later. We expect – and the central bank also has the same expectation – that it will be removed soon,” the PM said.
“We are ready to be in close coordination with the central bank… So I want to call on the population for calm; population and businesspeople should not give in to this stir and chaos caused by media, irresponsible experts and politicians. Official information is coming from the government and the central bank and please rely on that,” he said. “I’ve heard experts, who were saying previously that they were specializing on security issues, today saying that lari will depreciate – it’s not serious, these are completely irresponsible statements. Of course this is damaging our country.”
In July 2015, exports declined 24% year-on-year to USD 186.9 million and imports fell 15.8% y/y to USD 662 million with trade deficit decreasing 12.1% y/y to USD 475.1 million.
In the first seven months of 2015 exports were down by 23.8% y/y to US 1.26 billion, imports decreased 10.6% y/y to USD 4.3 billion, and trade deficit was down by 3.6% y/y to USD 3.04 billion. If excluding one-off import of donated C hepatitis medicines, totaling USD 232.6 million, imports in the first seven months of 2015 declined 15.4% y/y.
Remittances in July declined by 31.8% year-on-year to USD 93.39 million. Total of USD 632 million was transferred to Georgia from abroad in the first seven months of 2015, which is 24.2% less compared to the same period of last year.
Economy Minister Kvirikashvili said at the government session that over GEL 110 million has been raised from privatization of state assets; the figure is far short of government’s initially expected USD 300-350 million. In February government announced about intention to step up privatization to raise at least USD 300 million in two-three months to help stabilize falling GEL, which at the time was 29% weaker against U.S. dollar compared to early November, when it started depreciation.
In March, amid continued depreciation of GEL, Economy Minister Kvirikashvili announced about the plans to scrap corporate income tax on reinvested profits in an attempt to boost economic growth in the long term. The plan, however, has not yet been materialized and no relevant bill has been proposed.
MP Mikheil Machavariani of the opposition UNM party said on August 25, that instead of laying out concrete plan on how to tackle GEL depreciation and economic troubles, PM Garibashvili blamed “emotional-psychological stir” for weakening currency.