Lari appreciates: 1 USD equals 2.1878 GEL - NBG buys $20m at Foreign Exchange Auction

The National Bank of Georgia (NBG) has purchased 20 million dollars at the Foreign Exchange Auction to control the national currency’s rapidly changing value against the US dollar.

Georgia’s central bank purchased $20 million USD at the Foreign Exchange Auction to ensure the Georgian Lari (GEL) did not strengthen too quickly and cause negative effects for local businesses.

The weighted average exchange rate saw 1 USD equal 2.1872 GEL.

This was the seventh intervention this year since the Lari started depreciating in 2014.

In January the bank sold $60 million on the foreign exchange market to support the ailing Lari.

No interventions were made in February however within the last three months NBG purchased $115 million USD in total.

In particular the Bank made its first intervention on March 17 when it purchased $5 million USD at the Foreign Exchange Auction; then $10 million USD (March 21, April 14, April 20) and then $20 million USD (on April 21, on May 5, on May 10 and again on May 17) as the Lari firmed.

Despite the NBG’s actions the Lari continued to appreciate, and yesterday Bloomberg's trading platform fixed the Lari below 2.20 mark.

From yesterday, 1 USD equalled 2.1878 GEL. The previous rate was 2.2003 GEL.

Meanwhile, 1 Euro cost 2.4788 GEL, down from the previous rate of 2.4903 GEL.

The Georgian Lari started to gain value against the US dollar after falling dramatically 18 months ago. Now the GEL was also starting to strengthen against the Euro.

The Georgian Government and the country’s economic team forecast the Lari would strengthen further, however the current macro-economic situation did not accurately provide a strong base to quickly evaluate the Lari.

Despite the fact Georgia was receiving more income from tourism and a growing number of international tourists are visiting the country, there was a significant misbalance in January-April trade, according to experts.

Compared to last year Georgia received 38 million GEL (about $17 million/ˆ15 million*) more income in March from international tourism, said Georgia’s Economy Minister Dimitry Kumsishvili, howeverGeorgia’s trade deficit equalled $2.071 million, which made up 63 percent of total trade turnover.

The National Statistics Office of Georgia (Geostat) said in January-April 2016 the value of goods exported from Georgia decreased 12 percent to $608 million, while the value of goods imported grew 14 percent to $2.7 billion.

As for money transfers, Georgia received more money from abroad in April 2016 compared to the same month of 2015. The sum of money transfers coming into Georgia in April 2016 was four percent or $3.7 million USD more year-on-year (y/y), said NBG. Remittance figures showed $94.8 million USD was transferred into Georgia in April 2016.

The Georgian economic experts said all these figures did not provide a proper base that the Lari would gain value so fast. They doubted the Lari’s evaluation was mainly caused by receiving more investments, however Geostat will publish data on Foreign Direct Investments (FDIs) on June 9. (Agenda.ge)