Money apart: how Georgia has managed the conflict with Russia

Денежки врозь: Во что Грузии обошелся конфликт с Россией

The US dollar against the Georgian national currency – lari made up 2,9171. This is a new historical minimum. Such exchange rate of Georgian currency on Friday, 26 July, established by the national Bank of Georgia. Information was published on the regulator’s website.

Commercial banks and exchange bureaus currently gel can be exchanged for the dollar at the rate of 2.96. Thursday, July 25, the dollar is worth 2,9010 gel.

The President of the national Bank of Georgia Koba Gvenetadze said on Wednesday, July 24, that the country has a floating exchange rate. According to him, small in size the country’s economy is often affected by shocks from outside. Despite this depreciation is short-term, and in the near future, the currency should stabilize, assured the head of the regulator.

One of the reasons for the decline – new data on the reduction of tourist flow. According to the company economic research, TBC Research data which led the media, the number of visitors to Georgia of Russians decreased by 21.4% in the first week after the ban on flights between the two countries.

On the background of the depreciation of the lari in Tbilisi also increased the price of gasoline. Thus, the operators of the Georgian petrol stations (gas stations) have raised the price of fuel on average by 5 tetri ($0,02). So, gasoline Regular (AI-92) in the gas station Rompetrol, Gulf and before that cost of 2.49 lari (0.86 USD) per litre, now its price is 2.54 lari (0.88 USD).

Now it is expected that following the petrol price will rise and food in the country – at least by 8-10%.

To depreciate the Georgian currency has become amid the conflict with Russia, which still continues and leads to a reduction in the volume of tourists entering the country.

Recall, June 20, Tbilisi embraced the protests. The reason for the anger of the Georgians was the Russian delegate at the session of the Interparliamentary Assembly of Orthodoxy – the state Duma Deputy Sergei Gavrilov, who occupied the chair of speaker of the Georgian Parliament. This caused a wave of indignation among the inhabitants of the country. Protesters in Tbilisi, chanted various slogans and indicated that the website was “occupier” and participated in the conflict in Abkhazia. Gavrilov denied this information.

On 21 June, Russian President Vladimir Putin signed a decree banned the Russian airline starting from July 8, to perform air transportation of citizens from the territory of the Russian Federation on the territory of Georgia. Putin’s decree was made public after the President of Georgia Salome Zurabishvili has called Russia an “enemy,” saying that Moscow is allegedly interested in the division of the country.

The loss of Georgia on the termination of air links with Russia could reach $750 million, said earlier at a press conference the head of the Association of hotels and restaurants Shalva Alaverdashvili.

“We crunched the numbers, and if today is fully closed market and the Russian tourists will not come, estimated damage will amount to 2.1 billion lari (about $750 million)”, – quoted the hotelier Sputnik Georgia.

With the beginning of the year total spending of Russian tourists in Georgia was $1.1 billion – 33% of the costs of the total tourist arrivals in Georgia.

The news resulted and led to the depreciation of the Georgian lari. June 25 lari for the first time after these events, the record has fallen. The dollar cost of 2.83 gel, which at the time was the most for the history of Georgian money since the collapse of the Soviet Union.

Although at first in Tbilisi did not recognize the relationship of the collapse of the currency, with foreign events, but later still recognized.

At the end of June, the national Bank of Georgia refused to support the lari exchange rate by selling foreign exchange reserves. A sharp decline course performs the role of a leveling shock mechanism, explained in the controller. The national Bank assumed that this external shock will have a negative impact on the balance of payments and lari.

“The depreciation of the lari was influenced by information from Russia,” – said in the Georgian Central Bank. Another record lari established on 10 July. Then Larry reached the level of 2.90 per dollar.

In July the Russian state Duma has asked the government to introduce President Putin proposals for retaliatory economic measures on the events in Georgia.

However, the Russian President urged not to impose sanctions against Georgia “out of respect for the Georgian people”. Insults in his address he called the “derivatives policy.”

He also noted that sees no need to get insulted him leading Georgian TV channel “Rustavi 2” the criminal case. “A lot of honor – to bring against such a criminal case. He’s rolling on,” – said Putin.

In this case, despite hints from Moscow to the warming of relations, yet the resumption of air links with Georgia official announcement was ever made.