The “AYFB” :the National Bank activities’ impact upon the exchange rate of the national currency

The “Association of Young Financiers and Businessmen - AYFB” held a briefing on May 18, at the “Reportiori” press-club. The topic of the briefing was the National Bank’s impact upon the exchange rate of GEL. As it was stated by the analyst of the organization, PaataBairakhtar, the “AYFB” believes, that the National Bank of Georgia and the steps taken by it, is much in charge of such rapid devaluation of the national currency in the country.

„The Young Financiers consider, that, the National Bank’s actions have contributed to and even accelerated the national currency devaluation. Obviously, it would not be fair to claim that the National Bank is the only institution contributingto this process, taking into account external shocks and crisis in the region through which the economy hadto pass, however, the National Bank did have relevant instruments to avoid such rapid devaluation of GEL.”

According to Bairakhtar, if we analyze the issue thoroughly and start discussion from the moment when the National Currency started devaluation, it would be easy to find National Banks actions incorrect. “The national currency has started devaluation since autumn of the last year, when the state budget was being approved; a few days after approval of the state budget, the National Bank makes a statement according to which, changes are to be made in the budget, while the budget was drafted in accordance with the parameters, provided by the National Bank itself. This factor had obviously affected the exchange rate of GEL. The second, also an important factor, which had contributed to the devaluation of GEL, is an issue of reserves. In winter, when the national currency was at the edge of the “shock”, the National Bank has not spent enough reserves and thus has led it to the “shock”. Further, after “shock”, it began implementing interventions of 40 million GEL per month, which did not actually change GEL exchange rate. It is also interesting to figure out, on what calculations was based this 40 million intervention? Why exactly 40 million and why once a month? While, in the previous years, the National Bank acted completely different. Looking thorough the practice of the previous years, for example 2008-2009, we see that the National Bank was acting totally different, implementing daily, 1-2 million interventions, which helped to stabilize situation.” - Stated Bairakhtar. He also noted, that it is important that the function of GEL accumulation has been diminished. The coefficient of dollarization exceeds 60%, while all macroeconomic parameters are improved compared with the previous year”.-stated the analyst visiting the “Reporter” press-club.