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Lari has fallen into revolt…2008-11-12 09:47
The world financial crisis will not hit Georgia. This is how the government has been trying to convince its people for two months. Meanwhile for the recent days the national currency rate has lost 20 points (10%).
On Saturday afternoon, November 8, in retail exchange points of the Georgian capital the lari-dollar exchange rate band was fixed at the mark 1,65 -1,70 lari per dollar. However in the morning 1,44 lari were offered. This week in a number of districts exchange points offered 1,76.
The first jump in the American currency took place after the end of operations of commercial banks. Therefore their depositors and corporate customers could not convert laris into dollars till Monday. And then the Georgian monetary unit lost several points more reaching the mark of 2007. The concept of volatility (currency chronic zigzags) that was unknown to the Georgian economy before gave rise to a panic in the capital. There appeared queues for dollars as for sausages in the Soviet era. As a result all green cash was sold out very quickly, and the exchange points simply closed up.
Experts for economic issues just added fuel to the fire - they forecast prompt return of lari to the positions of 2003. That will be an immense blow to the public sector employees as well as for the personnel of private companies. Besides the growth of prices for goods and services is dangerously real as the products sold in the local market are mostly imported. And the share of import in domestic products is rather great (raw materials, components, etc).
However all these expert economists are traditionally in opposition to the authority. The government continues to assert that the financial crisis will bypass Georgia. The previous day Saakashvili was assuring that in the near future the country's economy would demonstrate significantly higher growth rates that there were before the conflict with Russia.
Mikhail Nikolaevich emphasized that his government would oppose the impact of the financial crisis with more confidence than the Russian government. International processes will not cause any serious damage.
Other economists that support the line of the dominant party and the government assured that "there will be no catastrophic fall in the exchange rate as a significant infusion to the economy will be made by means of the international financial aid". The only problem is that Georgian businessmen find it more difficult to take loans - but this is the only effect of the financial crisis.
In fact, the arguments that the crisis would not reach Georgia sounded quite well-grounded. For instance there are no metallurgical plants that in other countries had to recede. Food prices have remained unchanged recently. They leaped up in August: people were stocking up in case of a long war.
Georgia's friends were full of optimism together with the government. For example Saakashvili's ex counselor for economic issues Laar, Estonia's ex premier stated in the interview with "Vremya novostey": "It is a miracle that the Georgian economy has not been ruined by the war while two-three years ago such a war could destroy everything here bringing the country to economic devastation". He is convinced that none the less Georgia has managed to maintain a favorable investment climate as the risks are left in the past.
Besides considerable international injections (donor countries have channeled $4.5 mln) seem to be quite capable of supporting a rather small economy of the country.