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UPDATE 2-Georgia's chief says lari to stabilise in near future
January 26, 2016 / 11:58 AM / 2 years ago

UPDATE 2-Georgia's chief says lari to stabilise in near future

(Adds’s intervention, new exchange rate)

By Margarita Antidze

TBILISI, Jan 26 (Reuters) - Georgian central bank chief Georgy Kadagidze said on Tuesday that the lari currency would stabilise in the near future and the bank would continue to tighten its monetary policy if needed.

He spoke as the currency hit a record low against the dollar and as the central bank made its third intervention on the forex market this year.

The ex-Soviet republic’s economy is suffering the side-effects of a fall in the Russian rouble, as Russia is a major trading partner. A decline in exports, and in remittances from Georgians working abroad, has added to pressure on the lari, while the government deficit is rising.

“We have every basis to say that the lari exchange rate will stabilise in the near future,” Kadagidze told a briefing.

“We will continue to tighten monetary policy if the lari continues to depreciate further,” he said.

Kadagidze added that depreciation of the lari currency was mainly related to negative expectations of market players with regard to the situation in neighbouring countries.

The Georgian lari currency hit a record low against the U.S. dollar on Tuesday, trading at 2.4984 to the dollar after weakening from 2.4923 on Monday. This compares to 1.75 per dollar in early November 2014 when it started to depreciate.

The lari’s previous all-time low of 2.451 per U.S. dollar was recorded in February 1999.

Kadagidze said that the balance of payments did not have an effect on the exchange rate as currency inflows to and from the country were balanced, and imports reduced.

He said the bank was intervening on the market this year, when it was needed to support the ailing lari.

The central bank sold $20 million at a foreign-currency auction on Tuesday, its third intervention on the forex market this year. It sold $40 million at the two previous auctions.

The bank sold about $300 million last year to support the lari.

Georgia’s foreign-exchange reserves fell to $2.5 billion as of Dec. 31 from $2.7 billion at the beginning of 2015. (Editing by Christian Lowe and Ralph Boulton)

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