**National Bank of Georgia Takes Steps to Replenish Foreign Exchange Reserves**
The National Bank of Georgia (NBG) has been trying to replenish its foreign exchange reserves after a sharp decline in October. To do this, the bank’s Financial Stability and Monetary Policy Committee raised the minimum reserve requirement on banks’ foreign currency liabilities by five percentage points.
**What Does This Mean?**
This change means that commercial banks will have to hold more funds as reserves with the NBG. Before this change, they were required to hold between 10 and 20 percent of their foreign currency funds in reserve. Now, they must hold between 15 and 25 percent.
The NBG says this move is aimed at preventing excess foreign currency from accumulating in the market and causing problems for the national currency.
**Why Did the National Bank Make This Change?**
According to the NBG, some citizens and companies converted their current accounts from the national currency (GEL) to foreign currencies during the pre-election period. This led to an excessive amount of foreign currency accumulating in the market. The bank says it is taking this step to prevent banks from giving out loans in foreign currency.
**Critics’ Concerns**
However, some critics believe that this move may not be as effective as the National Bank claims. They say that transferring funds from commercial banks to the NBG’s reserves does not actually increase the net reserves of the bank. Instead, it just means that the commercial banks will owe the NBG more money.
**Further Measures**
The NBG has also announced further measures aimed at reducing the dollarization of the market. From January 2025, individuals who receive a salary in local currency will be unable to borrow less than GEL 500,000 in foreign currency. This move is designed to limit foreign currency lending and reduce the surplus in the market.
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