National Bank of Georgia becomes net buyer of foreign currency in Nov, buys $124.5 mln - acting bank head

TBILISI. Dec 5 (Interfax) - The National Bank of Georgia (NGB) purchased a net $124.5 million on the domestic foreign exchange market in November after conducting currency interventions worth $591 million in the pre-election month of October, Acting Head of the National Bank Natia Turnava said.

"In October, amid high uncertainty, individual large transactions were made to purchase foreign currency. To prevent such large transactions from escalating into mass turmoil and spreading like dominoes, the National Bank conducted interventions, which it was fully entitled to do. Since November, the situation in the market has changed, which allowed us to begin replenishing reserves. In November, the net purchase amounted to $124.5 million," Turnava was quoted as saying by the bm.ge portal.

Commenting on the current depreciation of the lari, Turnava said, "We are dealing with only a psychological market reaction. Of course, market sentiment is very influential due to political instability." At the same time, there has been "misinformation and [negative] statements circulating about the lari's exchange rate," she said.

It was earlier reported that the NBG carried out a record volume of foreign exchange interventions to stabilize the lari in October 2024, selling $591.2 million on the market. As a result, Georgia's international reserves fell 13% or $627.5 million in October ahead of the elections, reaching a 28-month low of $4.085 billion as of October 31. Reserves have decreased 18.5% or $924.7 million since the start of the year.

After a relatively stable first half of November, Georgia's currency has fallen to its lowest level against the U.S. dollar since at least mid-June amid the ongoing mass protests in Tbilisi and other large cities in the country.

The lari's official exchange rate was 2.8478 lari /$1 at the close of trading on Monday, down 2.4% from Friday's close following a 1.7% decline over the previous two weeks. The currency fell to 2.8746 lari /$1 on Tuesday, but then rebounded to 2.8468 lari /$1 on Wednesday.

NBG data show that the lari fell to its lowest point this year, 2.8693 lari /$1, on June 14. It subsequently strengthened until October, when it began to weaken amid the run-up and aftermath of the parliamentary election, the results of which were not recognized by the EU or the U.S.

On November 28, Georgian Prime Minister Irakli Kobakhidze announced that the government was suspending EU accession talks until 2028. Georgia obtained EU candidate status in December 2023.

Mass protests began to take place in Tbilisi and other major cities following the prime minister's statement.

Georgia's top foreign policy priority remains EU integration, Kobakhidze said at the first meeting of the new government on December 2. "According to our government program, by 2028, Georgia must fulfill more than 90% of its obligations under the Association Agreement with the EU and the free trade agreement, and these obligations will definitely be met," Kobakhidze said.

He said he hopes for a significant reset in Georgia's relations with the EU and the U.S. "On January 20, the inauguration of U.S. President Donald Trump will take place, meaning that both the U.S. and the EU will have new leadership under whom we believe a reset in relations is possible," Kobakhidze said. The deterioration of relations with the West was not Georgia's fault, he said.