On his show, Caucasian Palette,

expert, Mamuka Areshidze, elaborated upon the actions of the National Bank of Georgia whilst discussing the reasons for the depreciation of GEL. According to him Mr Kadagidze repaid a USD 400 million loan to the World Bank two years in advance which facilitated the depreciation of GEL.

FactCheck

verified the accuracy of Mamuka Areshidze’s statement.

According to the information of the National Bank of Georgia and the Ministry of Finance of Georgia, the National Bank of Georgia has a loan from the International Monetary Fund and not the World Bank. In 2008 and 2009, due to the August 2008 war and the world financial crisis, the National Bank of Georgia was forced to borrow money from the International Monetary Fund in order to fill the foreign currency reserves. According to the information

of the Ministry of Finance of Georgia, the debt of the National Bank of Georgia to the International Monetary Fund grew by USD 491 million from October 2008 to the end of 2009 and amounted to USD 687 million.

The debt of the National Bank of Georgia has been decreasing from 2010 to 2015. According to the 30 April 2015 data, the debt decreased to USD 29.5 million. The debt of the National Bank of Georgia decreased by USD 400 million from October 2012 to 30 April 2015; USD 69 million was repaid from October to December 2012, USD 244 million in 2013, USD 73 million in 2014 and USD 13 million from January to April 2015. In addition, it is important to note that from 2012 to 2015 the National Bank of Georgia did not service its debt in advance and was acting in accordance with the schedule set by the International Monetary Fund.

Graph 1:

 Debt of the National Bank of Georgia to the International Monetary Fund

image001

According to Mr Areshidze, the National Bank of Georgia repaying its debt to the International Monetary Fund caused the national currency of Georgia to depreciate. FactCheck

attempted to find a correlation between repaying the debt and the exchange rate of GEL.

The debt of the National Bank of Georgia decreased by USD 537 million from 2010 to 2013. Despite this, the exchange rate of GEL was stable until the end of 2014. The value of USD 1 amounted to GEL 1.69 in 2010 and GEL 1.74 on 1 January 2014. The exchange rate depreciated by just GEL 0.05 in four years. In the same period, the amount of the debt of the National Bank of Georgia decreased significantly.

The exchange rate of GEL started to depreciate at the end of 2014. The debt of the National Bank of Georgia decreased by USD 73.1 million at the end of 2014. The exchange rate of GEL with regard to USD depreciated even further in 2015 and amounted to 2.36 by 1 May 2015. However, the debt of the National Bank decreased by just USD 13 million in this period. As we can see, servicing the debt by the National Bank of Georgia did not cause the national currency to depreciate. FactCheck wrote

about the connection between the National Bank of Georgia and the depreciation of GEL earlier as well.

The exchange rate of a national currency is determined by the internal demand upon it and the influx and outflow of foreign currency (international trade, money transfers, tourism, influx of investment and credit capital and factor revenues). The main reason for the depreciation of GEL was a significant decrease in the influx of USD. According to the preliminary data, export decreased by USD 243.4 million from January to April 2015 whilst imports dropped by USD 192.4 million. Exports started to decrease from August 2014 and dropped by a total of USD 481 million by April 2015. Money transfers also decreased by USD 103.6 million from January to April 2015 as compared to the same period of the previous year. Money transfers started to decrease from October 2014 and dropped by an overall amount of USD 171 million by April 2015.

Graph 2:

 Coverage of the Debt by the National Bank of Georgia and the Exchange Rate of GEL

image002

Conclusion

The National Bank of Georgia has a loan from the International Monetary Fund and not the World Bank. The National Bank of Georgia did indeed repay the debt of USD 400 million to the International Monetary Fund from October 2012 to 30 April 2015. However, from 2010 to 2015 the National Bank of Georgia did not repay its debt to the IMF in advance but repaid it according to the schedule each year. In addition, servicing the loan by the National Bank of Georgia did not cause GEL to depreciate.

Hence, FactCheck concludes that Mamuka Areshidze’s statement is a LIE.

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