TBILISI, JAN. 25 2017 (The Conway Bulletin) — Georgians have been lining up to convert their dollar denominated loans into lari under a so- called “larisation” programme aimed at easing debt burdens after the lari currency lost 21% of its value in six months.

The government will administer the programme jointly with the Central Bank starting from Jan. 17. It will run for two months.

Giorgi Tsutskiridze, the executive director of Association of Banks of Georgia, said that people had initially taken out bank loans in US dollars because they have a lower interest rate.

“Usually foreign currency loans have a relatively low annual interest rate, which is on average 3-4% less than loans in lari,” he told The Conway Bulletin.

Since the launch of the programme last week, 5,000 people have applied to switch their loans and around 250 have already made the switch. The majority of loans in Georgia are US dollar-dominated.

Georgian economy has been hit by a strengthening US dollar, a recession in Russia and weaknesses in its neighbouring economies.

Mr Tsutskiridze said the conversion of US dollar loans into lari was necessary to revive the economy.

“Dedollarisation is a vital strategy. Without rapid economic growth, we will end up in poverty,” he said.

In order to be eligible for the programme the loan must be linked to real estate received before Jan. 1, 2015.

Creditors will convert loans at 20 tetri less than the current rate with the government subsidising the difference.

Not everybody, though, is convince that the “larisation” plan is a good one.

“The lari is so devalued now against the dollar that even with the favourable exchange rate that the government offers, I would end up paying much more anyway,” said Merab, a Tbilisi resident who works in a local grocery store.

“I’d rather just wait and hope for the lari to stabilise.”

ENDS

JAN. 20 2017 (The Conway Bulletin) — Don’t be fooled by the parity rating on the percentage change for the Georgian lari.

This is a turbulent time for the Georgian currency. The graph on the right shows its recent spikes.

Just before Christmas it bottomed-out at an all time low against the US dollar of 2.81/$1. It has recovered since then, with the help of Central Bank intervention – it sold $40m on Dec. 20 totalling $280m in 2016 – but it is still working at a level that is 30% below its high of 212/$1 in June 2016.

Government ministers have blamed an overly strong US dollar for the lari woes but Georgia’s own macroeconomic data has shown up weaknesses which may be undermining confidence in it.

The Central Bank had been happy to let its currency slide. This laissez faire attitude appears to have abated now though and there have been warnings that interest rates will start to rise as the battle hardens to boost the currency. 2017 will be another turbulent year for the lari.

ENDS