How the National Bank of Georgia sets the official rate
The National Bank of Georgia (NBG) publishes official exchange rates of the lari on business days at about 17:00 Tbilisi time. The rates come into force the next day; the ones published on Friday apply on Saturday, Sunday and Monday. That is why this page shows two columns — the rate in force today and, once it is out, the rate for tomorrow.
The official rate of the US dollar is the weighted average of the deals made between banks on the interbank currency market during the day; trading takes place on the Bloomberg platform. The rates of the other currencies are calculated from the dollar rate and the rates of those currencies on international markets.
Nobody sells currency at the official rate. It is a reference: it is used in accounting and tax reporting, at customs, in contracts and court decisions, and banks and exchange offices set their own buy and sell rates around it.
The National Bank quotes some currencies per 10, 100, 1,000 or 10,000 units — the Russian rouble, the Armenian dram or the Japanese yen, for example — and the tables on Myvaluta.ge always say for how many units a rate is given.
A floating rate, with the National Bank as a market participant
Georgia has a floating exchange rate: the price of the lari is formed by supply and demand, not set by the National Bank. The bank does take part in the market. When the lari moves too sharply it can sell foreign currency from its international reserves at an auction, and in calm times it buys currency to refill the reserves. Such interventions smooth the swings; they are not meant to hold a particular rate.
Monetary policy
Only the National Bank has the right to issue lari banknotes and coins. Its main task is price stability, and it works with inflation targeting: the target for annual inflation is 3%.
The main instrument is the refinancing rate, the rate at which the National Bank lends to commercial banks. A higher rate makes loans in lari more expensive, slows the growth of the money supply and, other things being equal, supports the lari; a lower rate does the opposite. Decisions on the rate are taken by the Monetary Policy Committee several times a year and are announced on the National Bank’s site.
Dedollarisation
A large share of loans and deposits in Georgia is held in foreign currency, mostly in US dollars. For a borrower who earns in lari, a dollar loan becomes heavier every time the lari weakens, and this is a risk for the whole financial system. The National Bank has therefore pursued “larisation” for years: loans below a threshold set by the regulator may be issued only in lari, and banks have incentives to lend and to take deposits in the national currency. The more the economy relies on the lari, the better a floating exchange rate can absorb shocks.