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UPDATE 1-Georgia's c.bank chief does not expect further lari depreciation
November 3, 2015 / 2:43 PM / 2 years ago

UPDATE 1-Georgia's c.bank chief does not expect further lari depreciation

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By Margarita Antidze

TBILISI, Nov 3 (Reuters) - Georgia’s central bank chief said on Tuesday he did not expect further depreciation of the lari currency despite high inflationary expectations.

Georgy Kadagidze also told Reuters annual inflation could exceed the target of six percent in late 2015 and early 2016, but said it would return to the target by the middle of next year.

“The lari has stabilised ... and we don’t expect any further depreciation,” Kadagidze said.

The lari was trading at 2.3993 per dollar on Tuesday, slightly down from 2.3987 on Monday and well below its level of 1.75 seen in early November 2014.

The ex-Soviet republic’s economy is suffering the side-effects of a fall in the Russian rouble. Georgia has also suffered a decline in exports and remittances, which has added to pressure on the lari, and the government deficit is rising.

Renaissance Capital said the lari could weaken to 2.45 per U.S. dollar by year-end and remain roughly flat at 2.4 lari next year.

Annual inflation in the South Caucasus country stood at 5.8 percent in October, up from 5.2 percent in the previous month. Monthly inflation in October was 0.8 percent, down from 1.1 percent deflation in September.

“Inflationary expectations are still high,” said Kadagidze.

He declined to predict the outcome of a meeting on Wednesday of the bank’s monetary policy committee on the refinancing rate.

“We will discuss in detail whether or not an increase that took place two months ago affected inflationary expectations or whether there is still room for a further increase,” he said.

The bank raised its key refinancing rate on Sept. 23 to 7 percent from 6 percent, the largest increase this year, in an attempt to preserve financial stability, control inflation and support the lari currency.

It also sold $20 million at a foreign currency auction last month. It was the bank’s seventh intervention on the currency market this year after selling $230 million in six earlier auctions. Reserves stood at $2.464 billion as of Sept. 30. (Editing by Gareth Jones)

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