Today the National Bank of Georgia (NBG) sold USD 40 million during its foreign exchange auction today. Besides, the President of the NBG issued a statement on the current situation. Koba Gvenetadze suggests that after the pandemic and the elections, the GEL exchange rate will return to the “equilibrium mark”.
“The purpose of the interventions is not to control the GEL’s depreciation against the USD, but serves to supply foreign currency to the market.
I would like to remind you that Georgia has a floating exchange rate regime, which is an optimal choice for a small, open economy like ours. Interventions during the pandemic do not interfere with the market behavior of the GEL. The aim of the current interventions is to supply foreign currency to the market.
Although it is impossible to say where the equilibrium exchange rate of a currency is in terms of floating exchange rate, in all probability, the GEL has depreciated past its equilibrium point today. After overcoming the uncertainty surrounding the pandemic and overcoming the traditional election campaigning, the rate will return to its equilibrium point.
The impact of COVID-19 on the Georgian economy was mainly reflected in the practical disappearance of revenues from tourism.
The country’s economic team has attracted large amounts of foreign currency aid in to assist the pandemic-damaged economy, which will be provided to the economy in stages this year and possibly in the first half of 2021”, - said Gvenetadze.