Georgian LariEdit
The Georgian lari (GEL) is the official currency of Georgia. It is issued by the National Bank of Georgia and used throughout the country for everyday transactions, including cash payments and electronic transfers. The lari is subdivided into 100 tetri, and in domestic use it is denoted with the symbol ₾. Since its introduction in 1995, the lari has been the monetary anchor for Georgia’s post‑Soviet economic reforms and its ongoing integration with global markets. The currency’s performance is a common gauge of macroeconomic stability, investor confidence, and the credibility of reform efforts.
Georgia’s monetary history as an independent economy has been marked by upheaval and reform. After the breakup of the Soviet Union, the Georgian ruble era gave way to a new era of monetary sovereignty with the introduction of the lari in 1995. The transition aimed to restore price stability and create a monetary framework capable of supporting private investment, export growth, and a modern financial system. Over the ensuing decades, Georgia’s central bank pursued a policy mix centered on inflation targeting, financial supervision, and macroeconomic discipline, all of which have helped reduce inflation volatility and improve the business climate. The lari has experienced bouts of depreciation and appreciation in response to external shocks—commodity price cycles, regional energy dynamics, and geopolitical developments—while monetary policy and regulatory reforms sought to cushion households and businesses from shocks.
History
Georgian monetary reform began in the early 1990s as the country moved away from the legacy of the centrally planned economy. The lari’s introduction in 1995 established a national monetary framework distinct from the ruble and other regional currencies. In the following years, the central bank faced the challenge of stabilizing prices and building a credible institution capable of sustaining macroeconomic stability. The 2000s brought deeper financial sector reforms, improvements in governance, and measures intended to attract investment. Georgia weathered external shocks—such as fluctuations in global demand and regional financial pressures—by combining monetary flexibility with prudential supervision. Periods of rapid credit growth and external funding inflows were balanced by reforms aimed at containing inflation and strengthening the resilience of the banking system. In more recent years, the lari’s value has reflected both domestic policy credibility and external conditions, including tourism trends, remittance flows, and regional risk sentiment.
Monetary policy framework
The National Bank of Georgia operates an autonomous monetary policy framework focused on price stability and financial system soundness. The central bank employs an inflation-targeting approach, using policy instruments such as the policy rate, open market operations, and liquidity management to guide expectations and anchor inflation around a stated target. The central bank also oversees financial stability through supervision of banks and nonbank financial institutions, with macroprudential measures designed to dampen systemic risk and protect consumers. Georgia’s policy framework is widely discussed in relation to its openness to international capital flows and its ongoing economic liberalization. In addition to domestic policy, Georgia engages with international institutions such as the International Monetary Fund and various regional partners to reinforce credibility and technical capacity for reform. The currency’s exchange rate regime is typically described as a managed or flexible float, with occasional interventions to smooth excessive volatility when market conditions threaten macroeconomic stability.
From a market-oriented perspective, this framework emphasizes credible rules, transparent communication, and predictable policy paths. Proponents argue that a credible inflation-targeting regime supports investment and long‑term growth by reducing uncertainty for households and firms. Critics from more interventionist schools may favor stronger currency anchors or other forms of forward guidance, arguing that a more rule-based approach could further reduce volatility in times of global stress. In either case, the balance between exchange rate flexibility and policy credibility remains central to Georgia’s growth strategy.
Banknotes and coinage
The lari’s physical form—banknotes and coins—plays a visible role in the economy and in daily life. Banknotes feature designs rooted in Georgian history and culture, while coins cover the subunit tetri and the higher lari denominations used in everyday transactions. The National Bank of Georgia issues and withdraws notes and coins as needed, updating security features and denominations to reflect changing consumer needs and security requirements. The lari’s cash components coexist with a growing electronic payments system, which is part of Georgia’s broader financial modernisation agenda and its aim to widen financial inclusion while maintaining monetary control.
Economic role and international use
As the domestic unit of account, the lari anchors Georgia’s price formation, wage settlements, and tax receipts. Its value influences import costs, inflation, and the overall business climate. Tourism, remittances, and export performance all interact with the lari’s dynamics, affecting consumer prices and the economy’s external balance. In international transactions, the lari is widely used within Georgia, while for broader cross-border trade and investment, foreign currencies such as the dollar or euro often remain the practical reference, reinforcing Georgia’s pattern of monetary integration rather than currency union membership. The currency’s stability and credibility are thus closely linked to Georgia’s broader reform trajectory and its integration with global markets.
Controversies and debates
Policy debates around the lari and Georgia’s monetary framework mirror broader tensions between market liberalism and state intervention. Supporters of inflation targeting and a flexible exchange rate argue that these tools foster macroeconomic stability, attract investment, and promote long‑term growth by reducing price volatility and enabling automatic adjustment to shocks. Critics may argue for a stronger anchor or more aggressive stabilization policies during downturns, interpreting stabilization as a means to protect households from price swings and maintain competitive exchange rates in the short run. The central bank’s independence and the pace of financial liberalization are often discussed in the context of political economy, with emphasis on maintaining a credible rule of law, reducing regulatory uncertainty, and ensuring prudent fiscal management. The international dimension—relations with the IMF, the EU, and regional partners—also shapes these debates, as reform packages, financial support, and trade integration influence the credibility and durability of Georgia’s monetary arrangements.