Page 31 - GEORptNov20

7.0​ FX
Georgia - Foreign exchange rate
2016
2017
2018
2019
Jan’20
Mar’20
May’20
Jul’20
Currency (units per EUR) (average)
2.617
2.832
2.991
3.155
3.203
3.360
3.486
3.498
Currency (units per USD) (average)
2.367
2.509
2.534
2.819
2.883
3.041
3.198
3.063
Georgia’s central bank keeps up its forex interventions strategy
The National Bank of Georgia (NBG) has sold $40mn on the foreign exchange market in its fourth such intervention in October aimed at taming the shift of the local currency in the absence of foreign currency inflows generated by tourism.
In all, the NBG has released $120mn on the market, roughly the same amount as in three interventions made in September. The central bank has thus removed some pressure on present consumption, which would have accumulated via sharp currency weakening otherwise. The $1.5bn borrowed from foreign development partners during this year has assisted in its strategy. This can only be carried out within the forex reserves budget at the NBG and with consideration that the pressure removed is only backloaded and spread across a wider period of time.
In July and August, the interventions were milder, namely $60mn in each month.
Despite stepping up the interventions on the market in October, the monetary authority had to accept a higher exchange rate floor, at around Georgian lari (GEL) 3.2 to the USD, to defend, compared to under GEL 3.1 to the USD until mid-September.
Pressure towards further weakening of the GEL remain significant, as the country’s trade gap is still wide despite its narrowing during the coronavirus (COVID-19) health and economic crisis. In September alone, the trade deficit neared $400mn (although it shrank by 20% y/y), while the cumulative interventions of NBG on the market in the entire January-September period were $450mn.
31​ GEORGIA Country Report ​November 2020 ​ ​www.intellinews.com