“Psychological factor” of Georgian Lari devaluation

Irakli Kovzanadze, the head of the Parliamentary Finance and Budget Committee, explained that the recent depreciation of the national currency (Georgian Lari, the GEL) was due to a “psychological factor.”

The current value of the Georgian national currency against the US Dollar is 2.45-2.49.

Kovzanadze stressed at the end of August that existing market players carried out additional purchases under low-cost conditions, which “excessively affected” the exchange rate.

"This has a temporary and short-term nature. There is a free exchange rate in Georgia and that is why we face either the strengthening or devaluation of the GEL,” he said.

He stated throughout the summer that the people of Georgia saw that the currency was strengthening.

“The National Bank of Georgia did not allow a sharp strengthening of the GEL. Nearly 110 million dollars have been purchased. The NBG reserves were filled, which supported financial and monetary stability in the country,” Kovzanadze said.

“As for the situation in the last period, the end of August and the beginning of September, this can be explained by a psychological factor. As you know, there was a general expectation that in the summer the GEL would be strengthened, while it would be depreciated in September. At the end of August, the participants of the currency market carried out additional purchases under low-cost conditions because of this reason, “Kovzanadze said.

Georgia’s national currency started its sharp devaluation under the current Georgian Dream leadership in November 2014.

At that time, 1 USD was valued at about 1.75-1.78 GEL.

In that period, either foreign factors or the former chair of the National Bank, Giorgi Kadagidze, were blamed for the devaluation.

Now, the Georgian population, most of whom face hard economic conditions, has to be happy if one USD is equal to 2.35 or 2.40 GEL.

However, it is regrettable that the current state leadership always excludes or ignores its role in the Lari’s devaluation.

As it appears, it is unlikely for the national currency to regain its previous value against the dollar, which will be damaging for ordinary people who live in a country with such a poor economy.

It is high time that the current government takes more responsibility and pays due attention to this issue as the devaluation of Lari affects the lives of thousands of individuals who have shown trust in current leadership in recent elections.