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Irakli Lekvinadze does not see Grounds for Alarm regarding the Devaluation of the Lari at this Stage

Published: December 13, 2013 | 2:37 pm
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The economics expert Irakli Lekvinadze told PirWeli that the National Bank has mechanisms in place to protect the national currency from excessive fluctuation. Furthermore, according to him, the main reason for the devaluation of the Lari is the reduced influx of capital into the country, and the increased outflow.
“The Lari has been on the way down for several weeks now. In total, a 4% fall has been registered against the Dollar and other major currencies. At this stage, I don’t see any grounds for alarm and panic. Moreover, the National Bank has mechanisms in place to protect the national currency from excessive fluctuation. However, these trends do create certain tensions among the population and within the business circles, and worries about what could happen next, and how far this process can continue. If the process cannot be reversed, then consumer prices could be affected, especially on the main imported goods. Furthermore, people who have certain savings in the local currency may start converting them into the US Dollar. This process has not started yet, but expectations do exist,” Mr Lekvinadze stated, adding that the Lari is under pressure due to the following two factors – the reduced influx of capital, and the increased outflow of funds.
“If we look at the figures from the third financial quarter, there are minus 312 million in the debt repayment and capital outflow section, and 240 million in terms of the influx of capital. I see this as one of the main reasons for the weakening of the Lari. I personally would rule out seasonal factors – on the contrary, the demand for the Lari is high around this time, and the currency is usually strong. I therefore think that this trend will change after a certain period. The New Year is approaching, spending in local currency is increasing, and it will eventually lead to the strengthening of its exchange rate,” Mr Lekvinadze explained.
The expert thinks that the weakened Lari has so far not affected consumer prices significantly. According to him, while certain products have become more expensive recently, this could reasonably be linked to the pre-New Year period.

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