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Remittances from Abroad Continue to Trickle

The volume of remittances from abroad to Georgia is reducing from month to month.

According to the National Bank, $ 97, 7 million were transferred to the country in May 2015 that is 28.7 million or 22.7% less than in the same period of 2014. Amid a floating exchange rate of the Lari which depends on the volume of foreign exchange earnings, remittances from abroad are of particular importance.

However, the countries, from which Georgia receives the largest amounts, are currently experiencing an economic crisis – Russia, Ukraine, and now Greece are in a very difficult situation. That is why the question arises – how this process would affect the Lari, and how can the shortage of foreign currency be remedied arisen because of a decrease in remittances?

According to Vakhtang Lezhava, the Chancellor at “Free University”, now the national currency reached equilibrium point , but it is expected that in the autumn when the tourist flow decreases and government spending rise, the situation may be complicated. “Remittances are playing a big role in terms of stability of the national currency. In addition, they play a role not only in consumption, but investments. In addition to daily expenses, these funds are often spent on investments – such as apartments, cars, small commercial facilities, cafes, etc. This is one of the reasons for the decline in economic growth, “- he says.

In his words, there are two ways to solve the problems. “First – it is necessary to work more effectively on the opening of new channels of inflow of foreign currency. For example, to intensify the tourism policy and to attract more foreign investment. None of them are used today and does not seem to be used in the future that will lead to a decline in consumer demand, followed by a decrease in imports. Ultimately, investments will reduce and the economy will not grow , “- Vakhtang Lezhava notes.

According to the expert Vakhtang Bukriashvili, the decline in remittances from the three countries will not be able to have a rapid and significant influence on Georgia’s economy. “In the summer Georgia has always suffered a decline in the volume of remittances that usually increase in the fall and for the new year. With regard to the long-term economic policy, we should stimulate exports, and there are several plans that will increase activity in this direction. It is to increase production, so that the country does not depend on any one factor, including remittances, “- he stresses.

He believes the national bank’s reserves are to be used during the short-term shocks but if the problem is long-term, then, long-term measures should be planned to stabilize the exchange rate.  “This means that imports are to be stabilized, accordingly, a decline in demand for the currency. Also it is necessary to calculate the budget. Government should stimulate exports and this doesn’t require construction of new factories, it can be done in the present circumstances, “- the expert adds.