Georgia declares war against dollar

Georgia declares war against dollar

Georgia's government and the National Bank are planning steps to ease the pressure on the lari currency, including taking some of the burden off individuals repaying dollar mortgages and banning online credit services.

Georgian Prime Minister Georgy Kvirikashvili said the government was planning measures including fixing the exchange rate for individuals repaying mortgages in dollars 20 points lower than the market rate, with the difference to be subsidised by the government.

"According to our plan, loans which had been disbursed to individuals before Jan. 1, 2015, and supported by real estate, would be recalculated in lari at a rate which is lower than the current by 20 points," Reuters cited Kvirikashvili as saying.

"For example, if the rate today is 2.5 lari per dollar, the credit will be calculated at a rate of 2.3 lari per dollar."

Furthermore, from January 1, 2017 banks would be obliged to issue loans worth up to 100,000 lari only in the national currency, while from 2018 the change would expand to loans up to 200,000 lari.

According to Kvirikashvili, a new commercial law will be introduced soon, which will make inevitable to publish prices of goods and services in national currency, however this regulation does not imply to forbid announcing prices in different currencies as well, Caucasus Business Week reports.

"For example, developer companies need to publish flat prices in lari and at the same time note prices in foreign currencies. As a result we will decrease our population’s dependency on foreign currencies and exchange rates,” Kvirikashvili said.

The PM said the Government and the National Bank’s short term step included easing the loan obligations for a certain portion of Georgian citizens who had bank loans in US dollar. 

Despite several efforts the Georgian lari was continuing to fall against the dollar, with one lari currently valued at 2.53 against one dollar. 

The editor-in-chief of the Ekonimika Gruzii magazine, Emzar Jgerenaia, speaking to Vestnik Kavkaza, explained reasons for dedollarization of the Georgian economy.

"These are exceptional measures due to the fact that a large group of people took out mortgages in dollars, but now the dollar has become too expensive because of the devaluation of the lari. Given this trend, the authorities plan to make things easier for borrowers. The dollarization level was very high, nearly 70%. Therefore, foreign currency loans was a sensitive issue for many Georgian citizens," the expert noted.

"I think that the steps taken by the Government will give results at this stage. Property will be evaluated in lari, transactions will be made in lari, thus they will forcibly transfer debts from dollars in lari. I believe that the measures taken by the government to provoke a process that the lari will raise in consumers' eyes," Emzar Jgerenaia concluded.

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