Changes in Georgian GEL Rate Pokes Holes in Georgians’ Pockets

Eka Kevanishvili, Tbilisi

The exchange rate of the Georgian Lari has now temporarily stabilized at around 1.65 GEL against the US Dollar and has also lost value against the Euro. Despite the promising prognosis of the National Bank, which claimed that the exchange rate will not change radically and prices on products will not increase, people remain confused and afraid of what the future will hold. Many are frantically buying US Dollars.

The family of Nana Basilashvili, a resident of Tbilisi, has limited the list of products that she is able to buy for her household as a result of the decreased value of the Georgian Lari.

Nana Basilashvili: “Prices on products have increased and we cannot buy as many products as we used to. For example, the price of cooking oil has increased by almost 80 tetri.

Zizi Shaptashvili is one of many who are afraid of the future.

Zizi Shaptashvili: “I am afraid because I don’t know how my family will survive in future. Prices on almost everything have increased by 20 %. On everything-medicines, products, other goods: “I wanted to buy a pushchair for my child and I am very glad that I managed to buy it at the old price.”

People do not know what to make of the situation but are very much worried because the increased prices are buttressed against reduced incomes and consumer spending power. 

Aleksandre Gabodze: “Some people may take out a loan or sell gold if they still have some. If a person receives 500 USD, that was 700 GEL only short time ago, and now it equates to 850 GEL. Thus, it is a serious problem for people,” said Aleksandre Gabodze.

He added: “I sold gold when one USD bought 1.43 Lari. Now the rate is 1, 63. That amounts to a difference now of 20 GEL.”

As with other an ordinary citizens of the country who are facing serious problems because of changes in exchange rates, Aleksandre asked:

“What are they doing? I cannot understand. Everybody claims increased prices resulted from the increased rate of the USD; but how can it be? Why didn’t they reduce prices when the rate of USD was reduced?”

Davit Amaghlobeli, director of the National Bank provided some insight into such pressing questions.

Davit Amaglobeli: “The GEL turned out to be artificially reinforced in regard with the currencies of our trading partners, which was not a stable process and created serious dangers for the country’s competitiveness. Finally the time came when we needed to correct the rate of GEL. Moreover, it was important that this correction happened at once and suddenly in order to reduce looses to the minimum that can happen simultaneous to such kinds of process.”

“There are no economic grounds for cheapening the GEL in long future. The National Bank guarantees the stability of current rate of the national currency at the floating rate. And afterwards we will continue previous politics that means that the rate might have minor short-termed changes and this absolutely normal for any independently floating exchange rate.”

People hear these explanations but it is not very clear for them. Thus they prefer to stay in the queues at the exchange stands and to buy dollar. Sad people are leaving drug-shops and shops as they have not enough money.  Salome Topuria, a consultant in a drug store says: “Mainly the price of anti flue drugs have increased as it is the flue season now. The price of Mezimphorte has increased between 50-70 Tetries.”

Businesspersons are also very confused. Sandro Beridze, a representative of Bibi Company, which imports food from Europe explained:

“We made no profit during these several months. We do not want to increase price on our products as it will directly impact the people. Most people are going bankrupt. All our profit was because of the decreased Euro rate. Money circulation has decreased in Tbilisi as a whole. There is a great chance that we might not sell anything and the option is to increase the prices of our products. Hence, we prefer to work without profit just to recover the money we had invested in these consumer products.

Local economic experts evaluated the situation following the so called “Black Friday” stock market crash and forecasted a dismal future for the Georgian economy. Niko Orvelashvili, economic expert says that there is a chance that the government knew about the upcoming changes, and insiders profited from this pending crisis situation. However, this is not the most important issue that is faced for now.

Niko Orvelashvili: “The most important issue is that the country’s stability has been shaken and it is vitally important for us to know how to continue living  tomorrow, what to buy, what to sell and at what price level. If it was necessary to correct the exchange rate, the process should have been taken step-by-step, and done smoothly as my colleague Lado Papava suggests. It was necessary for businesspersons as well as people to know that the trend of interest rates and consequently prices would have changed accordingly. It was ill-inform to say that the exchange rate would not affect prices. This is especially the case when 80 % of consumer goods are being imported into Georgia.

Niko Orvelashvili says that neither financial reserves nor international assistance can hold the Georgian GEL rate on hold artificially:

“300 Million US Dollars were spent in two weeks to hold the rate on the point which was satisfactory for one or two governmental leaders. The government must understand that neither money reserves nor the promise international assistance in the pipeline can continue to maintain the Georgian Lari rate artificially.”

Eter Gigineishvili, who lives Tbilisi, says that if the government does change its politics and policies that unimaginable poverty will result. He explains that 
“Life will become much more difficult for most of people because only 5 % of the population lives in Georgia without have to count carefully each GEL they spend. The rest 95 %, are on limited budgets” says Eter Gigineishvili and enters a drug store to buy a drug on which the price has already increased.