On January 25 the monetary policy committee of National Bank of Georgia (NBG) raised the refinancing rate by 25 base point.
In his interview using the BusinessContract Beso Namchavadze discusses tightened monetary policy and noncore assets.?
-Mr. Beso, would you appraise interpretations that is generated by National Bank President over tightened monetary policy??
-In practice, it had been inevitable to tighten monetary policy rate. Therefore, this is a justified decision. Once the central bank expects the inflation to overlook the objective index (currently 4%), it is obliged to tighten monetary policy rate. It\’s something what factors have led us into the existing situation. GEL exchange rate depreciation, on the one hand, and raising excise tax, on the other instrument hand- Reacting, NBG were required to raise refinancing rate, however damages economic growth. This signifies a person\’s eye rate will rise and economic growth will decelerate . GEL-denominated loans can become higher in price, while commercial banks are obliged to issue? loans within just GEL. This can be a technical aspect. NBG did not have any other alternative. NBG wanted to take this decision, given it was not able to operate under high inflation rate. Experts observe that if something good happens in economy, it might balance this factor, in case your unique circumstances is maintained, GEL-denominated loans becomes expensive by 0.25%.
-According to NBG President, refinancing rate will rise to 7% for 2 quarters. Could NBG tighten the life insurance policy many was the mentioned 0.25% sufficient?
– NBG decision is based on certain calculations that include the so-called retarding period. Maybe, this became a justified decision with regard to technical aspects and it should bring certain results. However,? these were nevertheless amid 2016? a person\’s eye rate is lowered to 65, truly the cost declined to.5% and after this they started raising the rate again.
Their midterm forecasts failed to justified, because certain situation worsened in economy and in addition they must tighten monetary policy rate again. In whole, 6.75% is a very high rate. When i was younger the cost was 4% and lower.
-MP Ilia Tsulaia has put forward an initiative on noncore assets. Do you find it necessary today? to control the mentioned issue at legislative level?
-This issue has been regulated to a certain degree. I do not back the concept of tightening what the law states further. This will be inefficient and uncontrollable. If commercial banks are banned to obtain noncore assets, then other major business companies ought to be banned to complete identical. This policy may result in the specific situation bank shareholders will probably be barred to hold on to noncore assets. This really is impossible and we will ruin everything in that way.
NBG regulations remain restricted even now. M2 was stripped from Bank of Georgia, if your regulations were tightened. If we continue this plan, we shall must bar other activities to company? founders. I do not think it\’s a correct attitude.