Why households and businesses are holding more money in the national currency

BTUAI Research  •  September 2026  •  Tbilisi

Key Takeaway

In July 2026, deposits in Georgia’s banking system reached GEL 73.9 billion. Almost all of the nominal annual increase came from the national currency: lari deposits rose by GEL 10.8 billion, or 34.6%, to GEL 42 billion, while foreign-currency deposits stood at the equivalent of GEL 31.9 billion.

According to calculations by BTU researchers, lari deposits generated 90% of the total nominal annual increase and accounted for about 56.8% of all deposits. The shift reflects a wide interest-rate advantage, greater confidence in the lari, and the practical value of matching savings with lari-denominated income and expenses. Yet the transition remains incomplete: 57.6% of household deposits were still held in foreign currency.

Growth Driven by the Lari

National Bank of Georgia data show that total deposit liabilities increased by GEL 12 billion over one year, or 20.9% after excluding the exchange-rate effect. Lari deposits added GEL 10.8 billion, while foreign-currency deposits increased by only GEL 1.2 billion in lari-equivalent terms and by 7% after exchange-rate adjustment.

Deposit growth can reflect stronger economic activity, larger corporate turnover, rising wages and other income, or a movement of funds back into banks. But when national-currency deposits grow almost five times faster than foreign-currency deposits, the story is no longer only about more money in the system. It also concerns the currency in which households and firms choose to hold liquidity and savings.

BTU researchers assess that Georgia is seeing more than a deposit boom: the lari is gaining ground as a store of value. This is a material shift for the national currency, although it does not mean the dollar and euro are losing their importance in household portfolios.

The Interest Rate Gap Is the Strongest Incentive

The most direct economic case for the lari is the return on term deposits. In July 2026, the average rate on new resident household term deposits was 9.9% in lari, compared with 2.6% in US dollars and 1.5% in euros. The lari premium was therefore 7.3 percentage points over the dollar and 8.4 percentage points over the euro.

A simplified example makes the difference tangible. According to calculations by BTU researchers, placing 10,000 currency units for one year would generate 990 lari at the quoted lari rate, 260 dollars at the dollar rate, or 150 euros at the euro rate, assuming unchanged rates and ignoring product-specific conditions. Returns across currencies cannot be compared through interest alone because the exchange rate ultimately matters. Still, the wide gap provides lari savers with a significant initial cushion.

Under the same simplified comparison, the lari would need to depreciate by roughly 7.1% against the dollar or 8.3% against the euro for the annual interest advantage to disappear. This is not an exchange-rate forecast. It simply illustrates why a lari deposit has become more competitive for savers whose income and future spending are primarily in lari.

Annual inflation was 5.6% in August 2026. A mechanical comparison with the 9.9% July term-deposit rate leaves a 4.3 percentage-point gap. Because past inflation and future deposit income refer to different periods, this is not a forecast of the real return. The more defensible conclusion is that the nominal reward on lari deposits remained high enough to attract savings.

Confidence and Exchange Rate Expectations

High interest rates attract savings only when depositors do not expect a sharp depreciation of the national currency. Confidence is therefore the second part of the story. Deposit dollarization declined to 43.2% in July 2026. The International Monetary Fund has also said that improved market confidence and a weaker US dollar supported the decline in deposit dollarization in Georgia.

Georgia’s official international reserves exceeded USD 7.5 billion in July and reached USD 8.14 billion in August. Large reserves do not guarantee a particular exchange rate, and the lari can move in either direction under Georgia’s floating regime. They do, however, strengthen the external buffer and can reduce the perception that every external shock must immediately become a financial crisis.

BTU researchers assess that a lari-saving decision combines two expectations: the interest reward must be attractive, and the expected exchange-rate movement must not erase it. In mid-2026, these conditions aligned in the lari’s favor.

Why Businesses Are More Lari Based

Households and companies are not moving at the same speed. Deposit dollarization was 34.1% for legal entities in July, versus 57.6% for individuals. During the month, the corporate ratio fell by 1.3 percentage points, while the household ratio declined by 0.4 percentage points. Businesses are therefore further along in the shift toward the national currency.

The practical logic is clear. For a company operating in Georgia, much of its revenue, payroll, tax bill and local supplier spending is in lari. If near-term expenses are in lari, holding operating cash in dollars creates conversion costs and exchange-rate risk. A higher lari return reinforces the case. More money in corporate lari accounts may therefore represent not only long-term saving but also more rational working-capital management.

Household behavior is more closely tied to memory and perceptions of safety. Foreign currency often remains a long-term hedge, especially when a future major purchase-housing, a car, education or travel-is linked to dollars or euros. Household term-deposit dollarization was still 51.5%. The lari’s progress is real, but foreign currency remains central to family portfolios.

Policy Has Also Shaped the Incentives

Lariization is not solely the result of private preference. Over time, the National Bank of Georgia has used macroprudential and reserve tools that link the cost of foreign-currency funding to banks’ dollarization levels. This framework encourages banks to compete for lari deposits and increase the national currency’s share in their funding.

A relatively high monetary policy rate also supports returns on lari deposits. That benefit is not free: expensive lari funding can feed into lari lending rates. What is attractive for a depositor may therefore mean higher financing costs for a borrower. The final economic benefit depends on whether banks can transform the larger lari funding base into productive and reasonably priced credit.

Why This Matters for Georgia

A larger lari deposit base has several systemic benefits. First, it reduces currency mismatch. When income, savings and liabilities are in the same currency, households and companies are less exposed to sudden exchange-rate changes. Second, National Bank policy decisions pass more effectively through deposit and lending markets. In a highly dollarized system, domestic monetary policy is partly constrained by foreign-currency conditions; lariization reduces that dependence.

Third, banks obtain more lari funding for domestic credit. This matters especially for small and medium-sized businesses that earn in lari and do not have a natural hedge for foreign-currency debt. Fourth, a deeper lari deposit market can support longer-term local-currency finance, although volume alone is not sufficient: maturity and stability of deposits also matter.

According to an assessment by BTU researchers, the central macroeconomic value is not symbolic confidence in the currency but better allocation of risk. If a household earns and spends in lari, and a company sells, pays wages and taxes in lari, savings and financing in the same currency create a less fragile balance sheet.

What the Boom Does Not Prove

Rapid deposit growth does not prove that every Georgian household is saving more. Banking deposits include term savings, demand accounts and corporate operating balances. Nominal volumes also respond to higher income, prices, turnover and financial flows. A 34.6% increase in lari deposits therefore does not imply an equal increase in households’ discretionary savings.

Nor is de-dollarization irreversible. A sharp exchange-rate move, weaker inflation expectations, or a narrower interest-rate gap could change portfolios again. Large companies can react particularly quickly because they can move funds across currencies at relatively low transaction cost.

Four indicators deserve close attention: the interest-rate gap between lari and foreign-currency deposits, household dollarization, the maturity structure of deposits, and lari volatility. If the national currency gains share not only in current accounts but also in long-term savings, the trend will be much more durable.

Conclusion

Households and businesses are holding more money in lari because three forces came together in 2026: a much higher return on national-currency deposits, relatively calm exchange-rate expectations, and the practical benefit of managing lari income and expenses in the same currency. Businesses have moved faster, while households still retain foreign currency as part of long-term financial security.

This is an important signal, but not yet a final break with dollarization. The increase in lari deposits to GEL 42 billion shows that the national currency is strengthening its role as a store of value. The durability of the shift will depend not on a single exchange-rate episode, but on low and predictable inflation, credible policy, banking stability and the lari deposit’s continuing economic advantage.

Data and Main Sources

National Bank of Georgia – Monthly Review, September 2026

National Bank of Georgia – Current Trends in Loans and Deposits

International Monetary Fund – 2026 Article IV Consultation with Georgia

National Bank of Georgia – Changes in Minimum Reserve Requirements

Disclaimer

This material is analytical and educational. It does not constitute financial, investment, tax or legal advice. Consult an appropriate professional before making a specific decision.

Prepared by the academic team of Business and Technology University and the BTUAI Research Team, Tbilisi, Georgia.