Various explanations have recently emerged to explain on the ongoing depreciation of the Georgian Lari. According to one such explanation, which is also supported by the government, the depreciation of the national currency is caused by a global appreciation of the US Dollar. Proponents of this explanation often point to changes in the past year’s exchange rates of various foreign currencies against the US Dollar. This data indeed shows that compared to other currencies the Georgian Lari has lost the least of its value. However, in our view, this reasoning is insufficient. In order to explain the Georgian Lari’s depreciation by the global appreciation of the Dollar, the starting point should be set not at the beginning of 2014, but at November 20-21 of that year - the moment when Lari started its sharp depreciation. Until November 2014 the Lari remained stable throughout the year. Therefore, it is disingenuous to set the starting point at the beginning of 2014 when calculating the exchange rate. Considering the above, we compared the exchange rates of some actively discussed currencies against the US Dollar starting November 20, 2014. What we found was that in this period the Georgian Lari had the 4th largest drop, after the Russian, Belarusian and Moldovan currencies.

Data source: xe.com

Therefore, referring only to the appreciation of the US Dollar and the weakness of other currencies does not fully explain and reveal the real reasons for the depreciation of the Georgian Lari.