Lawmakers from the ruling National Movement Party criticized the central bank and its president for, as they put it, a failure to timely tackle the high rate of inflation last year.
Roman Gotsiridze, the president of National Bank of Georgia (NBG), presented the bank’s annual report to the legislative body on May 10.
He told lawmakers that the high inflation rate, which reached 8.8% in 2006, was mainly caused by external factors including Russia’s economic embargo and rising energy prices. The report’s overall assessment of the central bank was highly positive and optimistic.
But lawmakers from the ruling majority, surprisingly, questioned the report’s positive assessments.
“The report creates an impression that the 2006 monetary problems have been tackled very well by the National Bank and as if the country’s economic success last year was a result of the bank’s activities,” MP Irakli Kovzanadze, chairman of the parliamentary committee for budgetary and financial issues, said during the parliamentary hearings.
He said that the NBG “had failed to forecast risks and challenges” which emerged last year.
“The report says that inflation was mainly triggered because of external reasons. But we think it was not a major factor,” he said.
Kovzanadze said that according to his committee’s estimations only one third of the entire inflation rate was triggered by external factors.
“The rest was due to internal monetary reasons,” he added.
The president of the NBG, Gotsiridze, said in his report that the share of external factors in the total inflation rate was 5.6%.
“The National Bank delayed undertaking measures against inflation,” Kovzanadze said in his criticism of the chief of the central bank.
He also noted that policy directed towards the appreciation of the national currency Lari against the U.S. Dollar was risky and “poses a threat to the country’s economy.”
In response, Gotsiridze told lawmakers that it was absolutely inadmissible to blame inflation on the National Bank.
“No one can prevent inflation when there has been a four-fold increase in gas prices [since 2005],” he said.
“I have been in politics for 20 years and I understand the pretext of your questions and complains,” he added, hinting that the ruling party’s criticism had a political undertone.
There are speculations that MP Kovzanadze, a close ally of Parliamentary Chairperson Nino Burjanadze, eyes the position of the central bank chief.
The parliamentary vote has to approve, or disapprove the report by the National Bank President. In case of disapproval, Gotsiridze may face resignation.