National Bank tightens monetary policy, - stated the President of National Bank Giorgi Kadagidze on the press conference today. As he said the depreciation of GEL reached the point when there is important threat the inflation process to influence on the prices. GHN talked the chairman of the economic development center Roman Gotsiridze who was giving advice yesterday to the National Bank.
- Did they take into account your advice? Is not it late?
It has no difference whose advice they took into account. The main thing is that they took right decision. It was not late. It would be wrong to begin interventions from National Bank. It was necessity to make proper steps by the government also. National Bank will make work other mechanisms too. It was tough decision. Unfortunately it will provoke interruption of economic growth and will increase unemployment. But that damage that could cause depreciation of GEL would be tougher. This is rule of economics. You have to scarify one for another. Now the refreshment of economics is sacrificed to the benefit of GEL. This is result of so called inclusive, social, regulated, patriotic, paternal, incentive economics. And of course here is no competence. I have said many times - to bring one-two foreign advisors. No they said we have our 41 ones. So they have!
We remind that the chairman of economic center Roman Gotsiridze stated yesterday that government can't control processes. "Instead of the cancelling all regulatory norms and valueless institutions, to create healthy budget, with the creation of new so called incentive organization they try to improve the situation.
There is one thing left to do. National Bank has to act immediately:
1. Raise the refinancing rate
2. Halve the number of refinancing loans. Commercial banks have to find money on the market. Increase percentage of deposit. There is rare to find the country where during two years was so increased credit investing.
3. Publish deposit certificates and decrease money supply.
4. Begin interventions.
5. In extreme cases increase the sum that should be reserved for commercial banks and all this should be done simultaneously.
It will decrease the tempo of economical growth in the future, unemployment will grow and will increase interest rate.
Is it bad? Yes it's bad!
But the situation concerning GEL is so called currency crush that will lead to more bad results!
What government can do? It has to read and listen to everything I was talking about during whole year.
