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. Last Updated: 07/27/2016

Georgia Works on Currency Stabilization

TBILISI, Georgia -- The future stability of the lari, Georgia's national currency, largely depends on whether the government succeeds in its efforts to increase revenue collection, a senior central bank official said Wednesday.

"It [the lari rate] depends on several factors: what kind of relations we have with the International Monetary Fund, how the new revenues ministry works and on fiscal policy," Soso Pkhakadze, chief dealer and deputy head of the hard currency department at the National Bank, said.

Pkhakadze said the current depreciation of the lari was a temporary seasonal phenomenon and was not dangerous.

The lari now stands at around 2 to the dollar, down from 1.88 lari in early December.

"What is going on with the lari now is only natural. It is dictated by the situation in the financial market as demand for the lari fell after the New Year's holidays," Pkhakadze said.

Georgia's central bank, on IMF advice, halted currency intervention at the end of 1998 and let the lari float freely. The currency has fluctuated between 1.8 and 2 to the dollar since.

But Georgia's current difficult economic situation, mainly caused by low tax collection and widespread graft, is worrying bankers and international financial organizations, concerned with the future of the lari.

The IMF, which is now considering a new program for Georgia, is not satisfied with revenue performance and wants improved tax collection and a fight against corruption before offering more money.

The fund wants Georgia to have a realistic budget with strictly limited financing from the National Bank, to cut spending and to increase revenues. The revenue shortfall last year was estimated at more than 100 million lari ($50 million). Wage and pension arrears amounted to more than 140 million lari, bringing the total for two years to 280 million lari.

Pkhakadze said the central bank's hard currency and gold reserves currently stood at around $150 million instead of the $213 million forecast for the end of December.