Georgia’s central bank sold USD 20 million at a foreign currency auction on January 26 as national currency, lari (GEL), fell to new low against U.S. dollar.
GEL, which hit all-time low of 2.4694 per U.S. dollar by the end of last week, was trading at 2.535 against dollar by Tuesday afternoon before strengthening to 2.4984 per dollar by the evening, 0.24% weaker than previous day.
GEL lost 4.2% of its value against U.S. dollar since the beginning of this year and 25.1% compared to year earlier.
President of central bank, Giorgi Kadagidze, said on Tuesday that the recent depreciation of lari is “mostly caused by negative expectations among market participants stemming from developments taking place in neighboring countries.”
PM Giorgi Kvirikashvili also said on Tuesday that the recent depreciation of lari was caused by external and not internal factors, and it is “a direct result of the devaluation [of national currencies] in our neighboring countries due to the falling oil prices.”
“We are fully aware of its painful effects on large part of our society. The government is doing everything to minimize impact of those external factors,” PM Kvirikashvili said, adding that the government has “a very good coordination” with the central bank.
Depreciation of lari is increasing debt burden of borrowers with U.S. dollar loans. Up to 65% of total loans in Georgia are denominated in foreign currency, mostly in U.S. dollar.
Central bank’s January 26 intervention was already the third one this month with USD 20 million sold each time. Kadagidze said that the central bank was carrying out “targeted” interventions aimed at dampening excess exchange rate volatility.
Central bank made total of nine interventions last year with total sales reaching USD 286.96 million.
Gross international reserves stood at USD 2.52 billion as of end-December 2015, up from USD 2.479 billion a month earlier and down from USD 2.699 billion a year earlier.