Experts and NGOs keep criticizing NBG

GEL devaluation, NBG policy and budget impact on GEL exchange rate were the main issues discussed in “Tbilisi Marriott” by the representatives of Georgian NGOs and experts.  

The Forum was arranged by “The Association of Young Financiers and Businessmen - AYFB”, “TSU Center for Analysis and Forecast”, “Caucasus University Economics and Healthcare Research Center” , “Economic Policy Experts Center”, “Organization of Young Analysts and scientists - Doctrine”, “Georgian Infrastructural Projects Initiative” and “Managers of Georgia”.   

Experts of economy and finances also participated in Forum.  The participants of the Forum have severely criticized NBG in the wake of GEL devaluation.

Increased refinancing loans, commercial banks’ debts growth and soft monetary policy are those factors, which ,the Forum participants believe, have influenced and intensified devaluation process of the national currency.

SosoArchvadze, an expert on economic issues, said that National Bank’s policy was like “adding fuel to the fire”. He stated that the impact of external economic shocks on Georgian National Currency was inevitable, but steps taken by NBG have exacerbated this impact, rather than softening it.  

MikheilDundua, an expert on economic issues, has represented comparative analysis of NBG and the US Federal Reserve Bank.

„Unlike US Federal Bank, National Bank of Georgia either was not able, or simply didn’t establish a proper control over the money supply during 2014-2014.  Supply of the national currency sharply and inadequately exceeded to the nominal economic growth, reflected in a sharp drop in a money circulation speed. Excess supply of GEL has encouraged foreign currency  purchase, which  finally has resulted in GEL devaluation.”- stated Mr. Dundua.  

NodarTchitchinadze, the President of “The Association of Young Financiers and Businessmen - AYFB” talked about GEL strengthening mechanisms. He considers that NBG can stabilize GEL exchange rate by means of monetary instruments, including certificates of deposits, refinancing rate changing, minimumreserve requirement changing and by raising refinancing rate.

„NBG has opportunity to positively influence exchange rate changes. However, due to targeting inflation, the NBG has a compelling argument in favor of the  soft policy, rather than strict  one. In the circumstances of high dollarization, I consider it wrong to focus on the target inflation. By strengthening national currency and stabilizing GEL exchange rate, the National Bank can provide a positive effect on the economic development, but it refuses to act this way. By contrast, its policy has negative impact on the exchange rate” – stated Mr. Tchitchinadze.

MirianGogiashvili, the former Minister of Finances has talked about the inefficiencies of targeting inflation. He has noted, that the authors of this model themselves emphasize, that it is prohibited to use this model in terms of high dollarization and if one chooses this model, he/she must follow its principles. None of these requirements are met in Georgia and this is the reason why its economic results are critical here.

ShotaGulbani, a Vice-president of “The Association of Young Financiers and Businessmen _ AYFB” talked about an issue of the Government spending and its impact on GEL exchange rate. “An average cost of Government spendingis lower, than the world average, while it was higher in previous years. There is a declining trend in Government spending with respect of GDP as welland Georgia has one of the best indicators in this regard among EU and Black Sea countries” – stated MR. Gulbani.

Forum was carried out through  discussions. 30 specialists of relevant fields attended the Forum.