TOPIC OF THE WEEK: Georgia—Key FX flows continue to pour in as the NBG accumulates FX reserves

CAUCASUS / CENTRAL ASIA - Report 23 May 2025 by Ivan Tchakarov

The NBG Governor made what appeared to be a surprising statement this week, claiming that this year net FX purchases are already much higher than last year's net sales. Given that last year's net sales amounted to US$434.8mn while net purchases Jan to Mar were only US$101.7mn, net FX acquisitions from Apr until now must have been at least US$333.1 (the data for Apr will be out next week). Against the background of the large drop in FX reserves last year due to massive FX intervention around the Oct elections, this will surely be welcome news for the central bank and market participants.

Indeed, foreign exchange flows have been reasonably strong in recent months, while the weakening of the US$ in the global market has additionally supported the GEL. There has also been a normalization of the demand for foreign currency in the domestic market. The fraught political backdrop has not affected the main foreign exchange flows, including remittances and tourism, while the trade deficit, although still large, has stabilized so far this year. This has created an excess supply of US dollars, which has allowed the NBG to replenish FX reserves by a significant amount.

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