The International Conference Was Held On The Monetary Policy Strategy Of The NBG
On March 7, at the international conference held in “Tbilisi-Marriot”, Governor of NBG Giorgi Kadagidze presented the “Monetary Policy Strategy”. Among the conference participants were Masood Ahmed, Middle East and Central Asia Department Director, IMF, Mark Griffiths, head of the IMF mission, former governor of the Czech Central Bank Zdeněk Tůma and other high rank speakers. Representatives from international finance organizations discussed stages of monetary policy development in Georgia, Czech Republic and other developing countries.
“Today’s conference has two main purposes: The first one is to ensure NBG’s transparency. We claim that NBG is one of the most transparent organizations. This can be confirmed, e.g., by the amount of information we publish on our web-site every day. Our transparency is very important for the business sector, for financial sector representatives, so that they know exactly the reasoning behind our decisions and thus are able to make correct analysis and forecast, evaluate risks correctly, which in turn will help to take business decisions. The second purpose is to make Tbilisi and a whole Georgia the region’s financial center, which requires consistent and tireless work in many directions. One of these directions is to hold regular conferences in Tbilisi, to make it the place where representatives of business sector from different countries will visit to get new information about the newest world trends” - said Giorgi Kadagidze.
IMF representatives positively assessed NBG’s monetary and exchange rate policies. According to them, NBG implements correct and consistent policy – the kind of policies which helps countries to reach macroeconomic and financial stability and have affordable, cheap banking products.
NBG monetary policy strategy describes main principles of monetary policy in Georgia and directions of its development. Presenting the strategy the Governor of NBG, Giorgi Kadagidze said: “The main objective of NBG is price stability in Georgia, which is achieved by monetary policy. The more efficient the monetary policy is the lower are public costs needed to achieve price stability. Implementation of this strategy will further increase the effectiveness of monetary policy, which is important for the stable economic development of the country”.
Giorgi Kadagidze noted that monetary policy of NBG is based on the inflation targeting regime. “An efficient inflation targeting regime has many components and their improvement is a permanent process. It should be noted, that it is very important for us to achieve the progress through development of markets and building a proper foundation and not through some administrative methods. One of the advantages of inflation targeting is its transparency and ease of public communication, since one preset target allows NBG to define precisely a main goal and create correct expectations in respect to the monetary policy direction”.
Georgia is an emerging economy and such economies are usually characterized by high rates of inflation and economic growth. NBG’s inflation target for 2014 is 6% and for 2014-2015 – 5%. In the long run, along with the convergence of the Georgian economy to that of the developed countries, the optimal level of inflation will decrease and accordingly, the NBG’s inflation target will decrease to its long-term level.
Speaking on the monetary policy strategy the Governor of NBG emphasized the importance of floating exchange rate in Georgia.
“I would like to mention, that in Georgia we have the floating exchange rate regime. Our country is a small open economy, which is a part of the world economy. It is unquestionable that floating exchange rate regime is the most optimal for Georgia. NBG’s foreign exchange policy implies minimal interventions in the foreign exchange market. The purpose of the foreign exchange interventions is to decrease large exchange rate fluctuations caused by temporary excessive capital flows and to partially correct in the long run the imbalances between the foreign financing of private and public sectors”- said Giorgi Kadagidze.