Bank of Georgia should continue to supply foreign currency through currency auctions and compensate for the currency deficit, according to businessmen.

The Georgian business Association (bag) issued a statement on the unstable situation in the domestic currency market and the recent depreciation of the lari.

Another depreciation of the lari began immediately after the elections held on October 31. Among the main reasons, experts call the "seasonal factor" and the unstable political situation both in Georgia and in the region as a whole, because of which large investors do not enter the country. Experts fear that if the situation does not stabilize, the exchange rate of the lari, which currently stands at 3.36 GEL/$1, may soon reach 3.6 GEL/$1.

"First of all, it should be noted that the depreciation of the national currency and exchange rate instability weaken economic activity. The devaluation of the lari, especially the continuous one that we have been dealing with in recent years, hinders investment activity, " the BANK said in a statement.

Businessmen note that it is a mistake to assume that the devaluation of the lari is a problem only for a certain part of the business (for example, only for importers).

"In fact, they all suffer because the purchasing power of customers is falling, and aggregate demand is decreasing, therefore, company revenues are decreasing, financial reports are deteriorating, business and consumer relations are deteriorating, and so on. It is very important to note that the Georgian economy does not yet have the resources to replace imports as a result of the depreciation of the exchange rate," the appeal says.

BAGH notes that the exchange rate of the lari is affected by several factors, including fundamental economic factors, devaluation of national currencies in the main trading partner countries, complex epidemiology, political unrest after the elections and, as a result, other negative events.

"However, we believe that the situation in the foreign exchange market is alarming and requires timely intervention. The exchange rate of the lari has become the main barometer of our country's business and, consequently, the economy in recent years, and each subsequent depreciation of the lari puts business and the economy, both in the real and financial sectors, in an extremely difficult situation, " the statement says.

According to businessmen, in order to reduce the pressure on the foreign exchange market during this rather difficult period, the national Bank of Georgia should continue to supply foreign currency through currency auctions and compensate for the currency deficit caused by the pandemic in the country.

"The current situation suggests that there is a need for a more professional discussion involving all parties who can make a positive contribution to improving the situation in the foreign exchange market. Accordingly, we are ready to continue the dialogue with the government of Georgia and the National Bank in any format, at a professional and qualified level, to discuss the current situation, " BAGH suggests.

To stabilize the foreign exchange market, the national Bank has already held 21 auctions in seven months, where it sold 709.65 million dollars. The anti-record of the lari was recorded on March 27, 2020, when the national currency fell to the level of 3.4842 GEL/$1.

Sputnik-georgia.ru