Page 24 - GEORptMar20
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5.1.3 Capital flows
Money transfers to Georgia up 7.8% y/y in August
The volume of money transfers from abroad to Georgia during August constituted $146.4mn (GEL428.5mn), 7.8% up year on year, the National Bank of Georgia has said.
Over the past 12 months ending August, inflows rose by 8% y/y to $1.66bn, or nearly 10% of the country's annual GDP. The transfers, mostly wage remittances from Georgians working abroad, have risen by an average rate of around 10% per year over the past three years—after dropping by one-quarter in 2015 from 2014.
Nearly one quarter of the transfers came from Italy and Greece and the European Union accounted for 38% of the total. Transfers from Russia made up another 24% of the total while the US accounted for 10%.
In August 2019, $19.0mn (or GEL55.7mn) was transferred out of Georgia, 0.5% more compared to August last year.
5.1.4 Gross international reserves
Georgia cuts minimum reserves ratio to defend currency
Georgia’s central bank on October 1 cut the required reserve ratio for liabilities denominated in foreign currency, with a maturity of under two years, from 30% to 25%. The move follows the hiking, in two 50bp steps, of the refinancing rate to 7.5% during September and the sale by the national lender of another $40mn on the forex market in the month.
The declared purpose of cutting the required reserve ratio was releasing some $700mn to banks and thus preventing a further weakening of the local currency, the Georgian lari (GEL). The downside is that the move again encourages currency substitution, which has been targeted by the central bank over recent years. Also, the forex reserves held by the central bank decrease.
But central bank president Koba Gvenetadze gave an assurance that the monetary authority will only replenish the reserves when circumstances make it possible.
The government has said that there are no fundamental grounds supporting GEL weakening. On the contrary, the currency is undervalued by 7% to 8%,
24 GEORGIA Country Report March 2020 www.intellinews.com
