The „AYFB“: NBG actions adversely affect GEL exchange rate

Amount of refinancing loans keeps increasing and it adversely affects GEL exchange rate -  this is a comment made by “The Association of Young Financiers and Businessmen - AYFB” on the record high loan of 1 billion and 120 million GEL given to the commercial banks by NBG .

Refinancing loans, as well as permanent and same day payday loans have sharply increased from 855 million GEL to 1,120 million last week, that has negative  impact over the GEL exchange rate and as a result of this, GEL exchange rate has devaluated by several points.   

Short-term, one-week refinancing loans virtually  became long-term loans, as their volume has been permanently increasing during last months.

In 2013, the balance of refinancing loans has increased by 36 million GEL and amounted 400 million GEL for the end of the year. In 2014, the balance has increased from 400 to 712 million GEL; as for the current year, here, the historical maximum – 1,120 billion GEL was reported, meaning since 2014, refinancing loans have almost tripled. 

   When increase in refinancing loans has permanent and large-scale nature carried out throughout the entire year, the justification that the loans serve to the short-term liquidity supply for commercial banks is groundless and unfounded.  

In addition, if we look at the commercial banks’ total indebtedness to the National Bank, another trend, adversely affecting GEL exchange, will occurred. Historically, the National Bank has always had debts from commercial banks – if in 2013, debt of NBG taken from commercial banks amounted 690 GEL, today, commercial banks have debt of NBG amounting 683 million GEL, meaning, NBG has transferred 1,4 billion GEL to the commercial banks through using debt mechanisms. It should be also noted, that sharp increase in the money supply was recorded exactly in the period of GEL devaluation in the country.

The facts clearly indicate that the policy implemented by NBG has negative impact over GEL exchange rate. Although foreign factors were determinant for GEL devaluation, yet, Kadagidze’s office, with his policy, is adding fuel to the fire, and creates  additional pressure on the devaluated GEL.