Three main challenges for the financial sector in Georgia amid pandemic
By Natalia Kochiashvili
Friday, October 23
Within the framework of the annual meetings of the International Monetary Fund (IMF) and the World Bank, the President of the National Bank of Georgia (NBG) Koba Gvenetadze participated in the online meeting of the IMF Central Bank Governors of the Middle East and Central Asia, which was attended by the heads of central banks of 29 countries.
According to the information released by the NBG, the main topic of discussion was to promote economic recovery and maintain financial stability through monetary and financial sector policies. The meeting was chaired by Jeffrey Okamoto, First Deputy Managing Director of the IMF.
The speakers of the event were the President of the National Bank of Georgia Koba Gvenetadze and the President of the Central Bank of Morocco Abdellatif Jouhari.
During the meeting, the participants discussed the role of financial sector policy in promoting inclusive growth, as well as aspects of financial stability in a pandemic. In his speech, the President of the NBG spoke about the steps taken to mitigate the negative impact on the financial sector of the COVID-19 country's pandemic and to stimulate the country's economy. It also focused on policies pursued to strengthen the financial sector and challenges in the sector.
According to Gvemetadze, as a result of the reforms carried out in previous years, the Georgian financial sector has faced the pandemic crisis well prepared - with the necessary capital and liquidity buffers, high asset quality, and historically low rates of non-performing loans.
The challenges that Georgia came across were multiple: Firstly, even though the banking sector was ‘healthy’, the magnitude of the shock was uncertain; There was a confidence shock in the market, which could slow down lending to the economy and increase the shock; There was a high operational risk associated with the indefinite pace of pandemic development, lockdown, and, consequently, limited human resources for both the regulator and the financial sector.
“In response to these challenges, we have developed a temporary oversight plan that has allowed lenders to defer significant amounts of loan services during the closing period and, at the same time, extend lending to the real sector,” Gvenetadze said in a speech.
He also stressed that in parallel with the easing of monetary policy during the pandemic, additional liquidity delivery instruments were launched, such as “currency swaps for banks and microfinance organizations,” as well as “a tool to support lending to small and medium-sized enterprises.”
According to Gvenetadze, the crisis is not over yet but appropriate monetary policy actions and timely use of macroprudential instruments will enable the financial sector to withstand the negative impact of the pandemic and play a crucial role in restoring the Georgian economy.
The NBG sold $ 40 000 000 at the foreign exchange auction held on October 22nd. The average weighted exchange rate was 3.2173.
This is the 18th foreign exchange intervention by the NBG this year. The Central Bank has sold a total of $ 569,650,000 from foreign exchange reserves in 2020, including the above mentioned auction.
