Meet Mr.Lari

Enhance your understanding of his problems and introduce yourself to the factors that usually lead to currency devaluation process. Its impact on the country's economy. Who may benefit or suffer as the result of currency depreciation Also, you can go back to history of Mr. Lari. Have a look at his wardrobe, health and living conditions. Hear experts assumptions and interesting facts about money in an easily perceivable and comprehensive way.

Mr.Lari is ready to welcome...

How did the Lari devaluation process affect you?

People from market and exchange places share their personal experience regarding the Lari inflation process.

Lari Effect on Georgian Economy

Yaroslava Babych, Ph.D Economics from GeorgeWashington University, talks about the Lari depreciation and its major effects on the current Georgian market:

“Lari depreciation compared to November of last year is 35% against the US Dollar. But at the same time, many countries’ currencies have also depreciated: Russian Ruble, Azerbaijani Manat, Armenian Dram, even the Euro has depreciated against the US Dollar. Actually, the depreciation of the Euro reached approximately 13%, the highest rate since its launch. But if you ask European citizens, many of them wouldn’t have a clue. When the currency is depreciated, exports become cheaper and imports become more expensive. Inflation is a worry for both consumers and producers.

We saw it in the consumer and business confidence indexes. People were concerned about price increases, but that didn’t happen on the scale we would expect. 35% devaluation didn’t result in 35 % increase in producer prices, and the reason is that we are importing from countries that are also suffering from currency devaluation. For example, if we import tomatoes from turkey, the dollar price of these tomatoes will also go down. If we are importing something from Europe, the Euro prices are also likely to decline. So, these are the reasons why our consumer prices have only increased by 6%.

Overall, we can say that Georgian firms that are competing on the market, against imports from abroad have a chance to increase their production. So these firms can see a boost in their sales. For example, Georgia produces poultry meat and we also import a lot from abroad, so if the Lari becomes cheaper and dollar more expensive, then the foreign chicken will become more expensive. It also depends on which countries we are importing from. For example, if we are importing from Ukraine, which has also suffered a lot from devaluation, maybe their products will become cheaper. But let’s say that there is a firm that brings textile from Europe and sells it on the Georgian Market. The costs in Euro will go up and that means the price in Lari will go up for Georgian consumers, too.”

Thomas Burns has arrived from Los Angeles to start his own business in Georgia. As a founder of Spectra Post, a post-production studio says that Lari devaluation affects him, too.

“We work with clients all over the world, but we especially love working with Georgian filmmakers. All of our local clients pay us in Lari, of course. The problem is that we are continually ordering new equipment and software, and we order these from overseas in dollars. So every time the Lari weakens, it becomes more expensive for us to do business here. “

Anatoly Polichuk imports vehicle parts and accessories from the United States to Georgia.

“The importer has to pay for foreign goods with foreign currency, and when the Lari is less valuable, more Lari are needed to pay for them. Driven by competition, importing companies will pass some of this cost increase on to the consumers and charge higher prices for imported goods. Our company sees Lari depreciation as an objective reason that such processes have really taken place in the last year."

Lari devaluation caused price increases in the country:

1 tetri (Erti Tetri)

15.0 mm × 1.25 mm
1.38 g
Copper-nickel alloy (silver color)

Obverse: The Borjgali (a Georgian symbol of theSun with seven rotating wings) over the Christian Tree of Life, and the date of mintage, “1993”, with Georgian and English marginal legends on it, “საქართველოს რესპუბლიკა” and “REPUBLIC OF GEORGIA”.

Reverse: The denomination numeral "1" on the upper part of the coin, with the legend “თეთრი” (tetri) and the vinetendrilunderneath.

The edge of the reverse of the coin is circled with the plant ornament.

2 tetri (Ori Tetri)

17.5 mm × 1.25 mm
1.9 g
Copper-nickel alloy (silver color)

Obverse: The Borjgali (a Georgian symbol of theSun with seven rotating wings) over the Christian Tree of Life, and the date of mintage, “1993”, with Georgian and English marginal legends on it, “საქართველოს რესპუბლიკა” and “REPUBLIC OF GEORGIA”.

Reverse: The peacockwith spread wings on the upper part of the coin, with the legend “თეთრი” (tetri) and denomination numeral “2” underneath.

The edge of the reverse of the coin is circled with the plant ornament.

5 tetri (Khuti Tetri)

20.0 mm × 1.32 mm
2.5 g
Copper-nickel alloy (silver color)

Obverse: The Borjgali (a Georgian symbol of theSun with seven rotating wings) over the Christian Tree of Life, and the date of mintage, “1993”, with Georgian and English marginal legends on it, “საქართველოს რესპუბლიკა” and “REPUBLIC OF GEORGIA”.

Reverse: The golden statue of thelion from the 3rd millennium B.C.barrow of theAlazani valley, with the denomination numeral “5”, and the legend “თეთრი” (tetri) underneath.

The edge of the reverse of the coin is circled with the plant ornament.

10 tetri (Ati Tetri)

22.0 mm × 1.27 mm
3.00 g
Inner ring: copper-aluminum-nickelalloy (gold color). Outer ring: copper-nickel alloy (silver color).

Obverse: The Borjgali (a Georgian symbol of theSun with seven rotating wings) over the Christian Tree of Life, and the date of mintage, “1993”, with Georgian and English marginal legends on it, “საქართველოს რესპუბლიკა” and “REPUBLIC OF GEORGIA”.

Reverse: Saint Mamairiding the lion, 11th century silver plate gilded with gold from the Gelati Monastery. The denomination numeral “10” on the right hand of the coin, and the legend “თეთრი” (tetri) underneath.

The edge of the reverse of the coin is circled with the plant ornament.

50 tetri (Ormotsdaati Tetri)

24.0 mm × unknown thickness
6.5 g
Copper-nickel alloy (silver color)

Obverse: The coat of arms of Georgia, surrounded with a symbolic image of Sunbeams, the legends “საქართველო”, and the date of issue “2006” under the coat of arms.

Reverse: The denomination numeral “50”, and the legend “თეთრი” (tetri).

The edge of the reverse of the coin is circled with dots.

50 tetri (Ormotsdaati Tetri)

19.0 mm × 1.40 mm
2.50 g
Brass plated steel.

Obverse: The Borjgali (a Georgian symbol of theSun with seven rotating wings) over the Christian Tree of Life, and the date of mintage, “1993”, with Georgian and English marginal legends on it, “საქართველოს რესპუბლიკა” and “REPUBLIC OF GEORGIA”.

Reverse: The relief of theGryphon from the eastern facade of 11th centurySamtavisi Cathedral, with the denomination numeral “50”, and legend “თეთრი” (tetri) underneath.

The edge of the reverse of the coin is circled with the plant ornament.

1 lari (Erti Lari)

26.2 mm × unknown thickness
7.8 g
Copper-nickel alloy (silver color)

Obverse: Half-milled. The coat of arms of Georgia, the legend “საქართველო” on the upper left side, and the date of issue “2006” on the lower right side.

Reverse: Half-milled. Denomination numeral “1” and legend “ლარი” (lari).

Both sides of the coin have a microelement, a lion head (analog of the old ColchianTetri coin).

2 lari (Ori Lari)

27.0 mm × unknown thickness
8.00 g
Inner ring: copper-aluminum-nickelalloy (gold color). Outer ring: copper-nickel alloy (silver color).

Obverse: The coat of arms of Georgia, the rim with a circular legend “საქართველო”, and the date of issue “2006”.

Reverse: Denomination numeral “2” and legend “ლარი” (lari). The silver-color milled surface has an original design, representing a central symbolic image of sun rays.

Both sides of the coin have a microelement, a lion head (analog of the old ColchianTetri coin).

1 GEL (Erti GEL)

115 × 61 mm
White

Obverse: Portrait of Niko Pirosmanashvili(Pirosmani), famous Georgian artist with the legend „Pirosmani 1862-1918".

Reverse: Panorama ofTbilisi, the capital of Georgia, and an image of a stag from Pirosmani's painting.

Coins minted since 2006

2 GEL (Ori GEL)

115 × 61 mm
Rose

Obverse: Portrait of Georgian composerZakaria Paliashvili and legend "Zakaria Paliashvili 1871 - 1933" . The left side features the overture notes of his opera "Abesalom and Eteri"

Reverse: Building of Tbilisi Zakaria Paliashvili opera and ballet state theatre with the legend „Tbilisi National Opera and Ballet Theatre 1887"

Coins minted since 2006

5 GEL (Khuti GEL)

115 × 61 mm
Brown

Obverse: Portarait ofIvane Javakhishvili, a Georgian academician, with legend "Ivane Javakhishvili 1876-1940"

Reverse: Building of Ivane JavakhishviliTbilisi State Universityand an open book and a plant ornament underneath

10 GEL (Ati GEL)

125 × 63 mm
Blue

Obverse: Portrait of Akaki Tsereteli, a famous Georgian poet and public figure, with the legend „Akaki Tsereteli 1840 - 1915", a swallow and blossoming branch

Reverse: Portrait of mother from Georgian artist David Kakabadze's painting "Imereti - Mother of Mine" and vine tendril

20 GEL (Otsi GEL)

131 × 65 mm
Navy yellow

Obverse: Portrait of Ilia Chavchavadze, a public figure, with the legend „Ilia Chavchavadze 1837 - 1907, the magazines „Sakartvelos Moambe" and „Iveria", founded by him and his personal belongings

Reverse: Portrait of Ilia Chavchavadze, a public figure, with the legend „Ilia Chavchavadze 1837 - 1907, the magazines „Sakartvelos Moambe" and „Iveria", founded by him and his personal belongings

100 GEL (Asi GEL)

140 × 67 mm
Light green

Obverse: Shota Rustaveli graphic portrait and the legend "Shota Rustaveli XII c". The composition of angels raising the cross is depicted on the left side of the banknote

Reverse: A composition from the Biblical story "Daniel in the den of lions" from the Martvili monastery relief, and the legend "Martvili VIIc."

200 GEL (Orasi GEL)

146 × 72 mm
Yellow

Obverse: Portrait ofKakutsa Cholokashvili. The background of the banknote is enhanced with fragments of relief images of Georgian Cultural Artifacts.

Reverse: City ofSukhumiand relief fragments of the iconostasis found in the villageTsebelda ofGulripsh district.

Upgraded banknotes in denominations of 20, 50 and 100 Lari will be gradually issued into circulation.

During the 20-year history of Georgian Lari, this is the first major upgrade of the banknote design.
Original and well-known Lari banknote themes have been preserved on upgraded banknotes, but at the same time, histories featured on the banknotes have been diversified with distinct, new elements. The modified design presents Georgian cultural and historical heritage with more precision and modern appearance.
The upgraded Lari banknotes are characterized with distinct color spectrum that is harmonically synchronized with dominant and contrast colors of the main plots.
Sizes of Lari banknotes have been upgraded as well. The diagonal and symmetric growth principle has been used for banknotes with respect to denominations.
The style of design, parameters and security features of the upgraded banknotes are modern, tested and consecutive for each denomination. Furthermore, the components of the design are maximally integrated into security features, which consequentially create a concept of the one family.
The upgraded Lari banknotes are protected with modern and high technological and security features that, at the same time, are easily intelligible to users. Furthermore, the banknotes still have the special improved features for visually impaired people.
The upgraded banknotes are made with special materials and security mechanisms that make them robust against contamination and natural wear-and-tear.
The world’s leading security printing companies such as “Giesecke & Devrient” (Germany), “Oberthur Fiduciaire” (France), “De La Rue”(England) have participated in the process of improvement of the upgraded design for the Lari banknotes created by National Bank of Georgia.
The banknotes of the previous issues will remain in parallel circulation with upgraded lari banknotes.
The banknotes in denominations of 5 and 10 lari will be upgraded later.

Upgraded banknotes in denominations of 20, 50 and 100 Lari will be gradually issued into circulation.

During the 20-year history of Georgian Lari, this is the first major upgrade of the banknote design.
Original and well-known Lari banknote themes have been preserved on upgraded banknotes, but at the same time, histories featured on the banknotes have been diversified with distinct, new elements. The modified design presents Georgian cultural and historical heritage with more precision and modern appearance.
The upgraded Lari banknotes are characterized with distinct color spectrum that is harmonically synchronized with dominant and contrast colors of the main plots.
Sizes of Lari banknotes have been upgraded as well. The diagonal and symmetric growth principle has been used for banknotes with respect to denominations.
The style of design, parameters and security features of the upgraded banknotes are modern, tested and consecutive for each denomination. Furthermore, the components of the design are maximally integrated into security features, which consequentially create a concept of the one family.
The upgraded Lari banknotes are protected with modern and high technological and security features that, at the same time, are easily intelligible to users. Furthermore, the banknotes still have the special improved features for visually impaired people.
The upgraded banknotes are made with special materials and security mechanisms that make them robust against contamination and natural wear-and-tear.
The world’s leading security printing companies such as “Giesecke & Devrient” (Germany), “Oberthur Fiduciaire” (France), “De La Rue”(England) have participated in the process of improvement of the upgraded design for the Lari banknotes created by National Bank of Georgia.
The banknotes of the previous issues will remain in parallel circulation with upgraded lari banknotes.
The banknotes in denominations of 5 and 10 lari will be upgraded later.

Upgraded banknotes in denominations of 20, 50 and 100 Lari will be gradually issued into circulation.

During the 20-year history of Georgian Lari, this is the first major upgrade of the banknote design.
Original and well-known Lari banknote themes have been preserved on upgraded banknotes, but at the same time, histories featured on the banknotes have been diversified with distinct, new elements. The modified design presents Georgian cultural and historical heritage with more precision and modern appearance.
The upgraded Lari banknotes are characterized with distinct color spectrum that is harmonically synchronized with dominant and contrast colors of the main plots.
Sizes of Lari banknotes have been upgraded as well. The diagonal and symmetric growth principle has been used for banknotes with respect to denominations.
The style of design, parameters and security features of the upgraded banknotes are modern, tested and consecutive for each denomination. Furthermore, the components of the design are maximally integrated into security features, which consequentially create a concept of the one family.
The upgraded Lari banknotes are protected with modern and high technological and security features that, at the same time, are easily intelligible to users. Furthermore, the banknotes still have the special improved features for visually impaired people.
The upgraded banknotes are made with special materials and security mechanisms that make them robust against contamination and natural wear-and-tear.
The world’s leading security printing companies such as “Giesecke & Devrient” (Germany), “Oberthur Fiduciaire” (France), “De La Rue”(England) have participated in the process of improvement of the upgraded design for the Lari banknotes created by National Bank of Georgia.
The banknotes of the previous issues will remain in parallel circulation with upgraded lari banknotes.
The banknotes in denominations of 5 and 10 lari will be upgraded later.

Ani Kasarelli

Journalist
Georgia

Ia Shalamberidze

Journalist
Georgia

Hrayr Manukyan

Journalist
Armenia

Arus Hakobyan

Journalist
Armenia

Ilkin hasanov

Journalist
Azerbaijan

What should Mr. Lari do?

Barrie Hebb

Canadian Economist, Researcher, Professor, Expert As Barrie Hebb stated during the Q&A session after the discussion held within the conference: “Ukraine, Moldova, Georgia: Do all roads lead to EU?” by International School of Journalism in Ukrainian Catholic University (Lviv, Feb 25-27, 2016), that the issue of joining either the European Union or the Eurasian Union is not actually an either-or question, of course Georgia can still adopt the EU reforms and then join the EU, also Georgia does not have to join the Eurasian Customs Union to adopt similar policies and standards, “but there is no reason why Georgia could not go to the third way, which is what I would recommend and it is to look at what it actually has to offer to all those markets and do the strategic multilevel agreements. That is what most countries in the world do today, they have no choice. There is the whole bunch of complicated reasons why that is the case, it’s the case that most countries do not produce whole goods and sell in the separate market, they produce the parts of the goods and for this reason they are combined with many other countries in a very complicated ways and they can no longer face the either-or question, so I would say that you don’t have to wait for either of those Unions and go to your own way and strategically negotiate; you need for that a very strong leader who has a very good adviser and to prepare yourself for all the negotiations, that is not easy to do either,” – Hebb explained, - “All of us have to share with all the experience that we have, we do not have to wait for the EU to get fixed all those problems for us, this is something we have to do domestically without waiting”.

Students viewpoints from International School of Economics in Tbilisi

If it joins the Eurasian Union, Georgia can instantly benefit from open market and free trade with countries that Georgia finds easy to negotiate with on prices and regulations, but I think this would have a negative effect on the long run. By joining European deep trade, Georgia may not benefit from the beginning; I mean it will take time to adapt to the European market and its regulations, but in the long run, it is a much more profitable and stable market than any other in the world. Besides, the European Union guarantees equal rights, financial aid, and political support when assistance is needed.

Alexander Lezhava, 23

The countries of the Eurasian Union are located closer to Georgia than European countries. That makes the free trade with them more profitable, because of lower transportation costs. Besides, in these countries, the methods of conducting business, systems of distribution and consumer conduct are more similar to Georgian practices. All these factors increase the attractiveness of the Eurasian Union. Georgian companies will enter this market with fewer barriers and lower costs. On the other hand, Eurasian Union as a trading market is far inferior to European Union in terms of consumer rates, as well as in purchasing power. Moreover, Eurasian Union is less stable and it involves more risk compared to joining European Union (the factor of Russia, which often uses economic measures for political goals).

Akaki Liqokeli, 23

As trade experience with Russia shows, it is not a reliable partner for us. I would single out several benefits of DCFTA compared to Eurasian Union: DCFTA provides entry into the biggest and the most stable European markets without any tariffs, as opposed to the Eurasian Union, which obliges its members to set general tariffs and quotas. Another negative outcome of entering Eurasian Union will be the danger of increased tariffs which may reduce the competitiveness of domestic products.

Keti Melkadze, 23

I believe that joining DCFTA with Europe will be more beneficial than joining Eurasian Union. DCFTA guarantees duty-free access to the EU market, the world’s largest, most prosperous and stable market. It will boost trade between the EU and Georgia. Joining DCFTA will increase the quality of goods and increase investments from Europe. In addition, the stability of the European market will provide significant benefits in the long run. On the other hand, in the case of the Eurasian Union, because of political issues we would have unstable markets. The Eurasian Union offer certainly does not guarantee a partnership based on fair and clear rules. As a consequence, we will have only short term benefits.

Khatia Sharia, 24

Exchange rate history

1998: Russian crisis + fixed exchange rate policy of NBG (IMF links and explanation)

2005-2007: Foreign direct investments (FDI) and remittances increase .

2008: Georgian-Russian war (WB link)

2009-2011: Global financial crises (WB link)

2014-2015: Russian recession, currency devaluations in trading partner countries (IMF link)

Export Decrease

Georgian exports decreased by 25% in 2015 compared to 2014. Approximately $700 million (hyperlink to the next graph) fewer USD came into Georgia.

*Extrapolated estimating result based on factual results of January-October 2015

Source


Most of the products are exported to 3 main trade partner countries of Georgia: Azerbaijan, Armenia and Russia (47.5% decrease in 2015) . Those 3 countries’ currencies devaluated during the last year (Azeri Manat - 34%, Armenian Dram - 20%, Russian Ruble – 100%).

Top trading partners of Georgia (in exports)

Source

Decrease in remittances

In 2015 remittances decreased by 27% ($400 million)

Graph 3. Remittances to Georgia transferred by banks (million USD)

* Extrapolated estimating result based on factual results of January-September 2015

Sources page 111

Sources page 84

Sources page 83

Sources page 83

Sources page 83

Decrease in FDI

Foreign direct investments (FDI) declined by 40% or $700 million during the last year. Decline of FDI means less USD inflow to Georgia, which is one of the reasons for devaluation.

* Extrapolated estimating result based on factual results of January-June 2015

Source

National Bank policy impact on GEL devaluation

National Bank of Georgia (NBG) decides how much GEL should be in circulation. So when a decrease in FDI, trade and remittances means a decrease of USD in Georgian economy, the NBG can increase the amount of GEL in circulation. This can cause devaluation of GEL. The Graph 5 shows that the amount of GEL in circulation in 2015 was slightly lower than in December 2014.

Source: Monetary and Financial Statistics

National Bank of Georgia spent $300-400 million USD during 2015 to reduce the rate of devaluation, according to Graph 6.

Source: file “International Reserves and Foreign Currency Liquidity Template” from here

.

How is exchange rate determined?

Currency exchange rate is determined by the quantity of USD in country and quantity of national currency . Quantity of USD depends on country’s exports, foreign investments, and remittances. Quantity of GEL is decided by National Bank of Georgia.



4 main reasons for GEL devaluation

1. Export decrease (hyperlinks to next according paragraphs)

2. Decrease in remittances

3. Decrease in foreign direct investment (FDI)

4. National bank policy

Charts from the speech of Barrie Hebb, researcher, professor and expert in the Economy field presented during the conference: “Ukraine, Moldova, Georgia: Do all roads lead to EU?” by International School of Journalism in Ukrainian Catholic University, Lviv, Feb 25-27, 2016
The charts present the research, which explores, emphasizes and compares the overall economic situation and discourse of the several countries, including Georgia, Ukraine and its neighbor countries.

Source: Hebb-Shevchuk Analysis

More about the author:
Barrie Hebb is Canadian economist with focus on institutional performance and social welfare. He has been primarily based in Former Soviet Republics since 1998 (Kazakhstan, Uzbekistan, Kyrghyzstan, Ukraine and Russia) and has previously been employed in the Civic Education Project, the Aga Khan Foundation, The Center for Economic and Financial Research (CEFIR), the OECD, and Luxoft as well as holding positions in various universities. Barrie joined PIN/MANTRA in 2015 as a program manager for Economic Support Programs and is now Head of Mission. His central home-base is in Odessa.