This regime implies that the exchange rate is determined solely by the foreign exchange market, which consists of commercial banks, investment funds and those corporations and individuals that are interested in the purchase and sale of foreign currency. The central bank does not influence the exchange rate formation process. It is apparent that this regime is characterized by short-term fluctuations, but, at the same, due to this flexibility it is capable of absorbing shocks.

The official exchange rate of the lari is often used for accounting and other official purposes. It is calculated based on transactions secured on the interbank foreign exchange market.


Interbank trading with foreign currencies is organized in an international trading system (Bloomberg). Taking into consideration the secured transactions, the weighted average exchange rate of the lari against USD is calculated and announced as the official exchange rate for the next day. The official exchange rate of the Georgian lari against other foreign currencies will be determined according to the rate on international markets or the issuer country’s domestic interbank currency market on the basis of cross-currency exchange rates. The cross currency rates are acquired from the Reuters and Bloomberg information systems and the corresponding webpages of central banks. The information is automatically received, calculated and disseminated from these systems.


Official exchange rates are published on the NBG’s website no later than 17:00 on the calculation day. For detailed information on the exchange rate determination rules, please refer to the corresponding legal acts.  

International reserve management is one of the functions of the NBG. International reserves are the main assets on the NBG’s balance sheet. The allowed components of international reserves are defined by the Organic Law on the National Bank of Georgia.  


International reserve assets are calculated according to the IMF’s methodology and are published on the 7th day of the following month on the website of the NBG (see statistics).

The main principles and strategies of international reserve management are approved by the Board of the National Bank of Georgia. The main principles, in order of importance, are:  safety, liquidity and profitability. Therefore, international reserves are allocated in the securities of countries and multinational corporations, and in bank deposits with high rankings.

Georgia has a floating exchange rate regime as this regime facilitates long-term economic growth more than a fixed exchange rate regime. Therefore, the NBG does not intend to fix the exchange rate regime and does not intervene in the foreign exchange market, except for certain circumstances when the fluctuation has a high magnitude.

The lari is the national currency of Georgia that was introduced in 1995. Before 1997, Georgia had a fixed exchange rate regime and the lari it was pegged to USD. During a fixed exchange rate regime the national currency is pegged to the currency or basket of currencies of other countries. At that time a fixed exchange rate regime was desirable for Georgia as the country was experiencing a high level of inflation caused by internal developments; the trust in the national currency was low and pegging the currency (to USD) was necessary for stable exchange rates and the regaining of trust.


In 1997 Georgia switched to a floating exchange rate regime. Exchange rates are determined by market forces and this decision had theoretical grounds, as well as taking into consideration the experience of other countries that showed the advantages of a floating exchange rate regime over a fixed regime for economies like Georgia’s.


A fixed exchange rate or a common currency is the optimal decision for a country if it results in maximum economic efficiency. The necessary conditions for this to be true are the following: capital and labor mobility among the relevant countries, the risk sharing principle, and similar business cycles. For Georgia and the U.S., the listed preconditions are not met and therefore a fixed exchange rate regime might hinder economic development.


Even though the U.S. is one of the largest trade partners for Georgia, Georgia’s export-import relations are not limited only to the U.S. and include other countries that have different currencies and exchange rate regimes. Therefore, pegging the lari exchange rate to USD will fix it only to this one currency and it will still fluctuate against others. Consequently, fixing the exchange rate is practically impossible. The Asian crisis of the 1990s showed that appreciation of USD caused currencies pegged to it to appreciate as well as against the ones that were not pegged to USD. Consequently, the competitiveness of pegged countries considerably reduced, exports declined and imports rose, which worsened the trade balance. Similar problems were prevalent in some Baltic States and Latin American countries. Therefore, by choosing a fixed exchange rate regime, Georgia would face a similar risk when currency appreciation is not supported by the country's economic developments.


It should be also noted that a fixed exchange rate regime limits the effective and independent implementation of monetary policy. For instance, when the country is in recession and there is a need for expansionary monetary policy to stimulate the economy, like in 2008-2009 in Georgia, a fixed exchange rate limits the scope of action for the central bank and government because it is impossible to control both the exchange rate and money supply. Moreover, Georgia and the U.S. have different business cycles and their monetary policies take different directions. For instance, if the U.S. is in recession and is implementing an expansionary monetary policy, it might prove harmful for Georgia if its business cycle is in an expansionary stage.


Aside the abovementioned disadvantages, a fixed exchange rate regime facilitates the import of exogenous inflation in the country and deepens crises caused by exogenous events, while a floating exchange rate regime can absorb shocks and can serve as an automatic stabilizer. For instance, the price increase in 2010 was mainly caused by exogenous supply factors and would have been more severe with a fixed exchange rate regime. Exogenous price increases lead to a reduction in imports, the domestic currency appreciates and imported inflation can be partially offset.


To summarize, a fixed exchange rate regime can serve as one of the obstacles for economic growth and is, therefore, undesirable for Georgia's economic development.

The International Monetary Fund is an organization that intends to promote economic growth and financial stability through global monetary cooperation, international trade, high employment and a reduction in poverty. Currently, 187 countries are members of the IMF. The IMF mission has been present in Georgia since May 5, 1992.


From the foundation of the mission in 1992 to June 30, 2011 the IMF disbursed loans to Georgia totaling 974,350,000  SDR with an outstanding amount of 672,950,000  SDR. The SDR – special drawing right – represents international reserve assets, it was developed by the IMF and is used as a unit of account. The value of SDR is determined by the basket of the world’s leading currencies. (Information regarding Georgia's position in the IMF and other details can be found on the IMF’s website).