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the central bank used foreign loans to maintain the exchange rate close to what it should be in balance with the post-crisis economic recovery trajectory.
5.1.4 Gross international reserves
Georgia’s FX reserves up in 2020 despite extensive interventions to prop up lari
Georgia's foreign exchange reserves increased by $404mn in 2020, reaching $3.9bn as of the end of December, despite the $873mn sold by the National Bank of Georgia (NBG) for local currency stabilisation during the year.
In 2020, the central bank conducted a total of 26 currency interventions to mitigate fluctuations in the Georgian lari (GEL) exchange rate. The forex injections substituted for the lack of tourism revenue inflows amid the coronavirus crisis.
The increase in reserves was made possible by the $1.5bn in foreign debt raised by Georgia during the crisis.
By comparison, the $873mn spent by the NBG was roughly three times more than what was seen in foreign exchange auctions conducted during any other year in which such interventions were used. During 2016, the NBG sold $280mn through auctions, while in 2015 the volume of interventions was $287mn, and in 2014 it was $300mn.
The GEL exchange rate depreciated sharply in 2020 during the first wave of the coronavirus pandemic. On March 1, one dollar was worth 2.79 lari, while two weeks later the value reached 2.99, and soon after peaked at 3.40. The maximum rate in the history of the lari was recorded on March 27 last year, when one dollar was worth GEL3.48.
In March, the NBG held three currency auctions and sold $100mn. Panic trading stopped at the end of the month, and the government announced an anti-crisis plan and donor assistance. This broght the exchange rate back to GEL3.15 in April.
In June, the GEL strengthened to 2.95. But not much later the rate depreciated again, which, among other factors, was due to changed expectations about international tourism as the opening of borders did not go according to the plan originally put forward by the government.
32 GEORGIA Country Report August 2021 www.intellinews.com