Paid in Russian law: lari exchange rate and reserves

Georgia's adoption of the "Russian Law" has triggered significant economic concerns. Anticipation of Western sanctions and pessimistic market sentiment have driven capital flight, with citizens converting lari deposits to foreign currency. Bank deposits in lari declined by 515 million in May, marking levels comparable to crises in 2022 and 2021. Three Georgian companies listed in London experienced substantial share price declines.

The National Bank reduced foreign currency reserves by 936 million to 3.6 billion dollars, reaching levels unseen since June 2022. The bank sold 169 million dollars and purchased 530 million in gold. Adequate reserve levels face pressure amid potential escalating sanctions.

Western nations warn of enhanced restrictions, potentially including reduced capital inflows from the 8 billion dollar annual average, EU visa-free travel suspension, and frozen investment bank projects. Georgia's small, open economy faces considerable risk from strained Western relations, with outcomes hinging on government policy direction and October parliamentary elections.