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Editorial: Kazakh and Kyrgyz de-dollarisation

APRIL 8 2016 (The Conway Bulletin) – Central Banks in Central Asia are boasting about de-dollarisation these days, painting a rosy picture of their success in combating their economies’ dependence on the greenback.

A closer look at the stats, however, reveals that a combination of heavy interventions in the currency markets and interest rate tweaking were the main drivers of healthier Kazakh tenge and Kyrgyz som.

But now Central Banks have to grapple with inflation, which continues to grow, and demand for credit, which continues to shrink.

Central Banks propped up local currencies, against a US dollar that has now slowed its rise against Emerging Markets currencies and commodities.

Restrictions on exchange points, bans on pricing goods in dollars and public calls for confidence have all contributed to curbing the use of dollars.

But Central Banks might have run out of options now and they need to steer away from “crisis mode” if they want to really restore confidence in their still ailing currencies.

ENDS

(Editorial from Issue No. 275, published on April 8 2016)

Kazakh oil company finalises agreement with Vitol

APRIL 4 2016 (The Conway Bulletin) – Kazakhstan’s state-owned oil company, Kazmunaigas, said it finalised an agreement it signed in December with Switzerland-based oil trader Vitol. The deal will allow Vitol to buy oil from Kazmunaigas for an advance payment of up to $3b. The press service of Samruk Kazyna, the sovereign wealth fund that owns Kazmunaigas, said the deal will last for four years.

ENDS

(News report from Issue No. 275, published on April 8 2016)

Inter RAO considers selling its Georgian unit

TBILISI, APRIL 1 2016 (The Conway Bulletin) — Russian state-owned power company Inter RAO wants to sell a portion of its electricity generation assets in Georgia, a move that would confirm its retreat from the South Caucasus.

Sources told RIA Novosti that Inter RAO is looking for a buyer for its subsidiary Mtkvari Energy, which operates the 600 MW Mtkvari thermal power plant.

The Mtkvari plant — located near Gardabani, 40km south-east of Tbilisi — is the largest gas-fired thermal power station in Georgia. Inter RAO has been hit hard by an economic malaise in Russia and is looking to raise cash by selling non-core assets.

“At the moment, we cannot confirm that such a deal has taken place,” the company’s press service told media.

Last October, Inter RAO sold Electricity Networks of Armenia JSC, the grid operator in Armenia, to Tashir Group, a Russian real estate company.

ENDS

(News report from Issue No. 275, published on April 8 2016)

Kyrgyzstan bans price labels in foreign currencies

APRIL 2 2016, BISHKEK (The Conway Bulletin) — Kyrgyzstan banned labelling goods for sale in anything other than Kyrgyz som, a move it said would help strengthen the national currency and reduce its economy’s reliance on US dollars.

Since a crash in the value of local currencies in Central Asia and the South Caucasus last year, de-dollarisation has become a buzzword among Central Banks.

In Kyrgyzstan, the authorities have concentrated on persuading more people to use som over US dollars to buy goods. And this now includes banning shopkeepers from pricing goods in US dollars.

The punishment for pricing goods in US dollars still hasn’t been announced but it will be a challenge to the authorities to impose the ban successfully.

Zhumakadyr Akeneyev, a former head of oil traders association and now an economic commentator, said de-dollarisation was a positive step.

“Finally, for the first time since independence, we have turned our face to the national currency,” he said.

Other Kyrgyz said that while they broadly welcomed the move, they were also sceptical that it would work.

“I like this idea. Many people, who borrowed money from the banks in foreign currencies, suffered from devaluation of som,” said 25-year-old Saltanat. “However, I think the government should leave some space for use of foreign currencies too.”

ENDS

(News report from Issue No. 275, published on April 8 2016)

Gazprom cuts gas price for Kyrgyztan

APRIL 1 2016 (The Conway Bulletin) – Russian gas company Gazprom cut the price of gas it sells to Kyrgyzstan by 9% to $150 per 1,000 cubic metres. Kyrgyz President Almazbek Atambayev had been lobbying for this for some time, saying that a fall in global prices should mean a price reduction for consumers in Krygyzstan. Gazprom bought the Kyrgyz gas distributor in 2014 for a symbolic $1, promising to clear its debt and invest in infrastructure.

ENDS

(News report from Issue No. 275, published on April 8 2016)

Bus prices rise in Uzbekistan

APRIL 2 2016 (The Conway Bulletin) – The cost of public transport in Uzbekistan, which is run by the state, rose 20% on April 1, various opposition websites reported. The price increase is more evidence of inflationary pressure building in the Uzbek economy. Utility prices have also risen recently and information leaking out of Uzbekistan has suggested that the value of the Uzbek sum currency on the Black Market has fallen.

ENDS

(News report from Issue No. 275, published on April 8 2016)

Kazakh Central Bank says that confidence in tenge has returned

APRIL 5 2016, ALMATY (The Conway Bulletin) — Kazakhs have increased the amount of tenge they are keeping in bank accounts, suggesting that they now trust the currency once again despite it halving in value over the past seven months, Kazakhstan’s Central Bank said.

In February, Central Bank data showed that the amount of tenge saved in banks rose to 1.53 trillion tenge ($4.5b), up 5% from January. Significantly, too, the proportion of tenge as savings grew to 22% of the total, up from 20% in January.

Analysts said that two factors had contributed to this renewed confidence in the tenge. The first was that this year, the tenge has actually strengthened against the US dollar to around 340/$1 compared to an all- time low in mid-January of 390/$1.

In March, Kazakhstan’s Central Bank heavily intervened in the currency market, buying $1.2b on the Kazakh Stock Exchange, around 2.6 times more than it bought in February.

This, together with high liquidity ensured by capital held at the Single Pension Fund, helped to improve the tenge’s position, analysts said.

“The Central Bank now faces the problem of too much liquidity and too high interest rates,” Askar Akhmedov, senior analyst at Halyk Finance, part of one of the largest Kazakh banks, said in a report.

Secondly, analysts said the Central Bank’s policy of increasing interest rates on tenge savings in banks to 14% from 10%, in addition to dropping the interest paid on foreign currency savings to 2% from 3% was working.

On the streets of Almaty this more positive view of the tenge was, generally, reflected.

A pensioner said: “It is our national currency, and I trust it but the 50% drop in its value was unpleasant, especially for pensioners.”

Most people that the Bulletin’s correspondent in Almaty spoke to agreed, and it will be a relief to President Nursultan Nazarbayev and the Kazakh government that confidence in the tenge is returning after a torrid 2015.

There were some who took a more cautious approach, though.

“Nowadays the position of the tenge is unsteady and it may weaken again. If I had to choose between tenge and dollar to put money in deposit, I’d probably choose dollar,” said Aigerim, a music teacher.

ENDS

(News report from Issue No. 275, published on April 8 2016)

Kazakh businessman to chair KazKom

APRIL 1 2016 (The Conway Bulletin) – Kenes Rakishev, a businessman favoured by the Kazakh political elite to front companies they are linked with, was nominated to become chairman of Kazkommerts- bank. Mr Rakishev, 36, has steadily increased his stake in Kaz- kommertsbank over the past couple of years. He led the merger between Kazkommertsbank and BTA Bank which was riddled with debt. Analysts said that the merger of Kaz- kommertsbank with BTA Bank was driven as much by politics as it was by business motives.

ENDS

(News report from Issue No. 275, published on April 8 2016)

Oil export ban is illogical, says ex-Kyrgyz official

APRIL 1 2016 (The Conway Bulletin) – For the past six years, there has been an informal ban on petroleum exports from Kazakhstan to Kyrgyzstan, former president of Kyrgyzstan’s Oil Traders Association, Zhumakadyr Akeneyev, said at a conference in Bishkek. According to him this practice is illogical within the framework of the Eurasian Economic Union and it has caused a rise in illegal trading. Kyrgyzstan imports almost all its petroleum products from Russia.

ENDS

(News report from Issue No. 275, published on April 8 2016)

Kazakhstan’s KMG EP ditches dividend payout for the first time

ALMATY, MARCH 31 2016, (The Conway Bulletin) — KMG EP, a subsidiary of Kazakhstan’s state-owned Kazmunaigas, said it will not pay dividends this year for the first time in a decade, reflecting the impact of low oil prices on the company.

KMG EP had paid dividends each year since its IPO on the London Stock Exchange in 2006.

“The board of directors has recommended not to pay dividends on ordinary shares,” the company said in a statement.

“The decision not to pay dividends is caused by a sharp decline in oil prices since the end of 2014, as a result of which the company’s cash flow and operating profit turned negative.”

The board decided to override an earlier recommendation from the company’s independent directors to pay out dividends this year.

KMG EP’s revenues collapsed by 37% in 2015. Oil prices have fallen from around $120/barrel in June 2014 to around $40/barrel now. Earlier this year oil cost less than $30/barrel.

ENDS

(News report from Issue No. 274, published on April 1 2016)