Historical Sketch

In 1762, the Georgian territories were united to form the Kingdom of Kartli-Kakheti. Russia annexed the country in 1801 after an attempted Persian invasion and internal troubles. After the Russian Revolution of 1917, the territories of Transcaucasia proclaimed independence. There have been rivalling movements for a united Transcaucasian state and separate governments in Armenia, Azerbaijan, and Georgia. In 1920, after the communist victory in the Russian civil war, Georgia aligned with Soviet Russia, and in 1922, Russia and the three states of Ukraine, Belarus, and Transcaucasia formed the Union of Soviet Socialist Republics (USSR). In the Soviet territorial reform of 1936, Transcaucasia was partitioned, and Georgia became a separate Soviet republic. In 1991, Georgia withdrew from the USSR and declared independence. In 1992, the two regions of Abkhazia and South Ossetia seceded, and the Georgian government has lost sovereignty since then.

Monetary History Overview

After the Russian annexation of 1801, Georgia's monetary system was left unchanged for several decades. Accounting was traditionally done in Persian units, but the coinage had been in disarray for long time, consisting of hammered copper and silver coins. As a transitional remediateion, the Tsar authorized issuance of new milled silver and copper coins in 1802, and the Tbilisi mint began operations in September 1804. The denomination of the coins were expessed as Georgian Abazi, corresponding to the earlier Persian unit of account, now pegged to the Russian Ruble. In 1833, the transition period came to an end, and Russian coins were introduced in Georgia. The mint ceased operations in February 1834, and the Georgian coinage gradually disappeared from circulation.

In February 1918, the Transcaucasian government began issuing paper money and thus decoupled the region from the rest of the Russian currency area. However, the 1st Transcaucasian Ruble was subject to an even stronger inflation as the issuance of paper money soon went out of control. The first Transcaucasian state collapsed at the end of 1918, and the individual states took over. The Georgian government began issuing its own paper money in mid-1919 replacing the Transcaucasian Ruble at par. The new Georgian Ruble (Manat) was issued in such large quantities that the monetary economy almost collapsed. As remediation, plans were developed to issue a new gold currency, called "Marchili", to be pegged to the German Reichsmark. This could not be pursued, and inflation continued even after the Bolshevik takeover in 1920. Armenia, Azerbaijan and Georgia all joined the USSR in 1922 and were reunited into the second Transcaucasian state. It carried out a currency reform in January 1923, taking over the monetary sovereignty from the three constituent states. The 2nd Transcaucasian Ruble replaced the three currencies at different exchange rates, taking into account the different inflation rates that prevailed in the three individual states. The Georgian Ruble had depreciated much less during the individual statehood than the currencies of the other constituents, and the currency exchange occurred at par. The uncontrolled issuance of paper money, however, continued during the Soviet Transcaucasian period such that the Transcaucasian currency depreciated further against the Russian currency. When the Soviet Union finally introduced a stable currency in January 1924, the Transcaucasian Ruble (as well as the Georgian) had depreciated by a factor of 250 against the currencies of Soviet Russia. The currency reform in Transcaucasia was completed by mid-July 1924.

With the dissolution of the USSR, Georgia attained independence in 1991. The civil war prohibited a quick withdrawal from the Ruble zone. In April 1993, the Georgian Coupon was created as transitional currency, circulating in parallel with Soviet and Russian paper money. In August, the Coupon became sole legal tender and the link to the Russian Ruble was severed. What followed was hyperinflation during which the exchange rate multiplied by a factor of 1000 within one year, until the situation began to ease after mid-1994. In September 1995, a currency reform was carried out. Six zeros were cut, and the Georgian Lari became the new national currency. The exchange rate was floated from the beginning and lost about 30% until end-1990s. After that, the Lari has remained stable until the mid-2010s when depreciation has started to accelerate again.

Georgia joined the International Monetary Fund (IMF) on 28.05.1992.

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