Depreciation of Georgian lari sparks quarrel between government and opposition

By bne IntelliNews August 26, 2015

bne IntelliNews -

 

The National Bank of Georgia devalued the national currency, the lari, twice on August 25. The move has invited criticism of the central bank from the ruling party, while the opposition blamed the government’s incompetence for the instability of the lari.

The central bank set the exchange of the lari at GEL2.4161 to the dollar, extending a 1.6% drop in value to GEL2.364 between August 21 and 24. Prime Minister Irakli Garibashvili called on businesses and the population to stay calm, blaming the media, “irresponsible” politicians and experts for the instability around the lari. “It is absolutely clearly speculation and fuss. I would like to ask the population not to be led by this psychological-emotional frenzy,” he told a government meeting on August 25. “Let our citizens and businessmen not yield to chaos and fuss created by the media and remarks and statements made by irresponsible politicians and experts,” the Sputnik-Georgia news agency quotes the prime minister as saying.

Bidzina Ivanishvili, the founder of the ruling Georgian Dream coalition, has repeatedly accused the governor of the National Bank, Georgi Kadagidze, of inaction that has led to the “crisis of the national currency”, while the government has tried to curtail the central bank’s supervisory functions.

Declaring that financial stability was more important than economic growth for the government, Deputy Prime Minister and Economy and Sustainable Development Minister Georgi Kvirikashvili called for the revision of public spending and said that otherwise the National Bank would have to carry out significant interventions in the currency market.

Tamaz Mechiauri, head of the finance and budget committee of parliament where the ruling coalition holds 86 seats out of 150, openly accused the central bank of attempting to devalue the lari. “These suspicions are based on arguments which should be confirmed by facts. These facts will emerge after the Financial Supervisory Agency starts its work,” he said. In late July, President Giorgi Margvelashvili vetoed a controversial bill stripping Georgia’s central bank of its financial supervision functions and transferring them to the agency, which was designed to be under the government’s control.

In response to the prime minister’s accusations, MP Mikheil Machavariani of the former ruling United National Movement, once headed by former president Mikheil Saakashvili, refuted that Garibashvili’s statement had had an “absolutely negative impact” on the stability of the lari’s exchange rate. “The existing situation is a direct result of incompetent policy carried out by the government,” the MP claimed.

National Bank chief Kadagidze is one of the former government's few appointees still remaining in their posts. His term will end in 2016.

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