კონფერენცია

∘ DAVID CHELIDZE ∘
IMPORTANT TRENDS IN THE THIRTY-YEAR HISTORY OF THE NATIONAL CURRENCY AND SOME DIRECTIONS FOR OVERCOMING EXISTING DIFFICULTIES

Summary

Based on the analysis of the three laws regulating the activities of the National Bank of Georgia adopted after the restoration of Georgia’s independence (August 2, 1991; June 23, 1995; September 24, 2009), the first part of the paper highlights the obligation of the National Bank to ensure the stability of the national currency—the Georgian Lari—and, consequently, to protect it from high inflationary processes.

Alongside the chronological review of significant legislative norms (regulations) in force during the thirty-year period since the introduction of the Lari into circulation (October 2, 1995), as well as the amendments made to them, the paper analyzes the dynamics of the inflation targeting indicator, the actual annual inflation, and the medium-term (three-year) calculated inflation rates over the last decade (2015–2024).

One of the reasons identified for the frequent deviation of actual annual and medium-term (three-year) inflation rates from the inflation target set annually by the Parliament of Georgia is considered to be the abolition of legislative norms regulating the responsibility of the National Bank (its President).

Taking into account the existing situation and the clear upward trend of the country’s monetization indicator (Marshall coefficient)—which acts as a factor stimulating inflation—the paper presents the view that the legislative norms previously in force, which regulated the responsibility of the President of the National Bank in cases where actual annual or medium-term inflation rates exceeded the inflation target defined by Parliament in the document “Main Directions of Monetary and Exchange Rate Policy,” should be reinstated.

As a result of the historical amendments to the legislative acts on the National Bank of Georgia, which introduced restrictive, general, and insufficiently detailed regulations regarding the circulation of the national currency and negatively affected the exchange rate of the Lari, the paper proposes that such provisions should only be adopted and enacted on the basis of broad public discussion and specifically through legislative acts (including those related to free industrial zones, free trade points, and other cases). To this end, specific recommendations for the necessary legislative amendments are presented.

Finally, in order to prevent risks arising from the expanded circle of individuals (including non-residents and/or persons with criminal records) who may gain access to specific (including confidential) information in the country’s financial sector, the paper recommends the refinement of legislative provisions regulating the composition of the National Bank’s Board.

Key words: Thirty years of the lari, inflation regulation.

Ivane Javakhishvili Tbilisi State University Paata Gugushvili Institute of Economics International Scientific C O N F E R E N C E S "ECONOMY – XXI CENTURY"

E ISSN 2587 - 4691	∘ DAVID CHELIDZE ∘ IMPORTANT TRENDS IN THE THIRTY-YEAR HISTORY OF THE NATIONAL CURRENCY AND SOME DIRECTIONS FOR OVERCOMING EXISTING DIFFICULTIES Summary Based on the analysis of the three laws regulating the activities of the National Bank of Georgia adopted after the restoration of Georgia’s independence (August 2, 1991; June 23, 1995; September 24, 2009), the first part of the paper highlights the obligation of the National Bank to ensure the stability of the national currency—the Georgian Lari—and, consequently, to protect it from high inflationary processes. Alongside the chronological review of significant legislative norms (regulations) in force during the thirty-year period since the introduction of the Lari into circulation (October 2, 1995), as well as the amendments made to them, the paper analyzes the dynamics of the inflation targeting indicator, the actual annual inflation, and the medium-term (three-year) calculated inflation rates over the last decade (2015–2024). One of the reasons identified for the frequent deviation of actual annual and medium-term (three-year) inflation rates from the inflation target set annually by the Parliament of Georgia is considered to be the abolition of legislative norms regulating the responsibility of the National Bank (its President). Taking into account the existing situation and the clear upward trend of the country’s monetization indicator (Marshall coefficient)—which acts as a factor stimulating inflation—the paper presents the view that the legislative norms previously in force, which regulated the responsibility of the President of the National Bank in cases where actual annual or medium-term inflation rates exceeded the inflation target defined by Parliament in the document “Main Directions of Monetary and Exchange Rate Policy,” should be reinstated. As a result of the historical amendments to the legislative acts on the National Bank of Georgia, which introduced restrictive, general, and insufficiently detailed regulations regarding the circulation of the national currency and negatively affected the exchange rate of the Lari, the paper proposes that such provisions should only be adopted and enacted on the basis of broad public discussion and specifically through legislative acts (including those related to free industrial zones, free trade points, and other cases). To this end, specific recommendations for the necessary legislative amendments are presented. Finally, in order to prevent risks arising from the expanded circle of individuals (including non-residents and/or persons with criminal records) who may gain access to specific (including confidential) information in the country’s financial sector, the paper recommends the refinement of legislative provisions regulating the composition of the National Bank’s Board. *Key words:* Thirty years of the lari, inflation regulation.