Tag Archives: central bank

Azerbaijani C.Bank spent $1.2b in August defending manat

SEPT. 4 2015 (The Conway Bulletin) – Azerbaijan’s Central Bank spent nearly $1.2b defending the value of it manat currency in August despite devaluing it by a third earlier in the year.

With oil prices, the key driver of Azerbaijan’s economy, stubbornly hovering around 7-year lows, the data will add more pressure onto the currency and suggests that another devaluation may be possible. Across the Caspian Sea, oil-exporter Kazakhstan effectively devalued its currency for a second time last month after trying to defend it for over a year.

Reuters quoted a high-placed source at the Azerbaijani Central Bank as saying: “August 2015 was difficult from a financial point of view. The economies of large countries of the world declined and the price of oil also fell on world markets, which influenced the state of the manat.”

The Central Bank data showed that its reserves had fallen to $7.31b by the end of August from $8.5b at the end of July.

The South Caucasus and Central Asia region is trying to cope with a sharp decline in its economy. Suppressed oil prices and a recession in Russia have dragged down growth. Azerbaijan with its dependency on oil has suffered more than most.

The latest data means that the Azerbaijani Central Bank has spent 42% of its total reserves this year.

ENDS

(News report from Issue No. 247, published on Sept. 11 2015)

Markets: Central Bank reserves in Kazakhstan, Kyrgyzstan and Azerbaijan

SEPT. 9 2015 (The Conway Bulletin) — Perhaps the most important feature of news and data from the region’s money markets this week was details about the various Central Banks’ gold and currency reserves.

Kazakhstan’s Central Bank said it had increased its reserves in August to $29.1b. Kazakhstan has amassed reserves over the past 3 months after spending around $400m in April to contain the effects of the regional financial crisis.

In Kyrgyzstan, the Central Bank’s reserves hit $2b, according to the Central Bank, back up to the levels of August 2014.

In Baku it was another story. The Central Bank has been spending ferociously since it devalued its manat currency by a third in February. According to the state-linked Trend news agency, the Azerbaijani Central Bank spent 14% of its foreign currency reserves in August. In the last year, Azerbaijan has spent half its foreign currency reserves trying to defend the manat.

ENDS

(News report from Issue No. 247, published on Sept. 11 2015)

Georgian president signs banking law

SEPT. 10 2015 (The Conway Bulletin) – Georgian president Giorgi Margvelashvili signed into law a bill that switches supervision of commercial banks from the Central Bank to a state-linked body called the Financial Supervisory Body. Mr Margvelashvili tried to veto the switch but was blocked by parliament. Inter- governmental banks have criticised the switch and called it political.

ENDS

(News report from Issue No. 247, published on Sept. 11 2015)

Georgian MPs vote against veto

SEPT. 3 2015 (The Conway Bulletin) – Georgia’s parliament voted to overrule a veto by President Giorgi Margvelashvili that would have blocked the adoption of a controversial bill that stripped the Central Bank of its supervisory powers over the commercial banking sector. International organisations have criticised the bill as politically-motivated. The Central Bank has argued with the government over economic policy.

ENDS

(News report from Issue No. 246, published on Sept. 4 2015)

Comment: Kazakhs steady themselves for the impact of Devaluation 2

SEPT. 4 2015 (The Conway Bulletin) – Timing is everything and fortune favoured me last month.

By chance, I flew into Almaty 24 hours after Kazakh President Nursultan Nazarbayev and Central Bank chief Kairat Kelimbetov had released the tenge from its US dollar peg.

This effectively triggered a 23% devaluation of the currency. I would be able to experience Ground Zero in the latest Emerging Markets currency crisis. If you’re a journalist, this is a good thing.

But if my timing had been fortunate, Mr Nazarbayev and Mr Kelimbetov hadn’t been so lucky. They had overseen an earlier devaluation of the tenge, let’s call this Devaluation 1, which hadn’t worked out. The current currency crisis, Devaluation 2, is a direct result of this mismanagement.

Without warning Mr Nazarbayev and Mr Kelimbetov had devalued the tenge by 20% in February 2014, hoping to make the Kazakh economy more competitive. The timing was poor, though, and within weeks Russia had become a pariah state in the eyes of the West because of its support for rebels in east Ukraine. Sanctions followed, denting Russia which is still the main economic driver in Central Asia. Within another six months oil prices collapsed and the Russian rouble went into free-fall.

The original Nazarbayev-Kelimbetov devaluation strategy, was undermined.

And this forced them into a corner. Defying economic logic and trying to rescue their own pride, they defended the new tenge-dollar peg despite neighbouring currencies sinking and oil prices flat-lining.

In the end, Mr Nazarbayev and Mr Kelimbetov bowed to the inevitable. The tenge is now around 39% cheaper than it was in January 2014.

On the streets of Almaty, ordinary Kazakhs generally greeted the devaluation with a shrug. There was also a palpable sense of relief. A second devaluation was always going to happen. The day after the devaluation, the run on the exchange kiosks was for tenge which signalled that most people thought it had bottomed out and wouldn’t devalue further.

And, crucially, it felt as if people had seen it all before.

We know what is going to happen next. The fallout from Devaluation 1 will guide us through the fallout from Devaluation 2. There will be price inflation, followed by salary rises. There will be job losses and the competitiveness generated by the devaluation will recede.

The major difference now is that the tenge currency is, theoretically at least, floating free.

By James Kilner, Editor, The Conway Bulletin

ENDS

(News report from Issue No. 246, published on Sept. 4 2015)

Kazakh Central Bank picks new interest rate

SEPT. 2 2015 (The Conway Bulletin) – Kazakhstan’s Central Bank picked the overnight repo rate as its benchmark interest rate and main tool for manipulating monetary policy, setting it at 12%.

The decision came two weeks after the Central Bank allowed the tenge to free float, abandoning the peg to the US dollar. The free-float pushed the value of the tenge down by 23%, the second devaluation in less than two years.

“This rate is aimed at directing nominal rates in the money market and will become a key instrument of the credit and monetary policy, in the new inflation-targeting regime,” the Central Bank said in a statement.

The tenge traded at around 240 to $1 immediately after the new interest rate was announced, having strengthened from 252 to $1 after the US dollar peg was ditched in August. By comparison, in February 2014, before the first devaluation, the tenge traded at 155 to $1.

Analysts welcomed the relatively high benchmark interest rate, saying that the tenge needed this level of support.

Sabit Khakimzhanov, head of research at Halyk Finance, said that the Central Bank may even need to increase this key interest rate by one percentage point to 13%.

“The interest rate in the money market is the only instrument left at the disposal of the NBK (National Bank of Kazakhstan) to manage inflation and the exchange rate,” he said.

“Only by keeping the rates credibly high, that is, at a level sufficiently high to enforce the necessary discipline and for a sufficiently long time. The interest rate corridor 12-14% meets these requirements.”

Other analysts said the high interest rate may encourage Kazakhs to keep their money in the bank.

“The high rate levels are clearly seen as securing the banking system from deposit outflows and anchoring inflation expectations,” Dmitry Polevoy, a Moscow-based economist at ING Groep NV, told Bloomberg News.

Previously the key interest rate had been the ineffective refinancing rate set at 5.5%.

Earlier this year the Kazakh government said that targeting inflation was going to be the main driver of its future economic policies.

The problem is that with the tenge devaluing and with oil prices remaining stubbornly low, the Kazakh government has already said that inflation is likely to climb above its 6-8% corridor target.

ENDS

(News report from Issue No. 246, published on Sept. 4 2015)

Kazakh Central bank unveils new rate

SEPT. 3 2015 (The Conway Bulletin) – Kazakhstan’s Central Bank said that it was introducing a new key interest rate that would be its main tool for manipulating monetary policy. It set the new refinancing rate at 12%.

ENDS

(News report from Issue No. 246, published on Sept. 4 2015)

Kazakhstan devalues the tenge by 23%

ALMATY/Kazakhstan, AUG. 21 2015 (The Conway Bulletin) — Kazakhstan gave up its defence of the tenge by ditching a peg to the US dollar which had cost it billions to enforce, a move that knocked 23% off the currency’s value .

Businesses, policy makers and analysts will now be watching for a subsequent rise in inflation, as well as possible social unrest, in Kazakhstan.

At a government meeting broadcast on national television, Kazakh President Nursultan Nazarbayev said that the depreciation of the Russian rouble and a sharp fall in oil prices in the past year meant that it was becoming far too costly to defend the tenge.

“Let us face it, this is a necessary measure, there was no other alternative. Crisis always brings about change,” he said.

This is a major policy shift for Kazakhstan which had been alone in the Central Asia and South Caucasus region in stubbornly defending its currency. Perhaps the sudden devaluation of the Chinese yuan earlier this month was the trigger for the Kazakh devaluation.

Kazakh exporters had been struggling as their products became more expensive.

The devaluation will also damage the reputation of the Central Bank and the tenge. This is its second devaluation in 18 months. Since February 2014, the tenge has lost 39% of its value.

ENDS

(News report from Issue No. 244, published on Aug. 21 2015)

Kazakh Central Bank buys 10% stake in Kashagan oil project

JUNE 30 2015 (The Conway Bulletin) – The Kazakh Central Bank bought a 10% stake in Kazmunaigas from the country’s sovereign wealth fund Samruk Kazyna for 750b tenge ($4b), a move analysts said was designed to help the state- owned energy company pay off debts generated by a sharp fall in oil prices.

This is the second reorganisation of Kazmunaigas since June. It earlier announced the sale of half its 16.8% stake in the Kashagan oil project to Samruk-Kazyna for $4.7b.

Analysts at Halyk Bank, a Kazakh bank, said the latest move shifted debt once again from Kazmunaigas to Samruk Kazyna to the Central Bank.

“If the first transaction raised the net debt of Samruk-Kazyna, the second lowered Samruk- Kazyna’s net debt, and the credit risk. By divesting of Kazmunaigas, Samruk-Kazyna reduced the most expensive part of its debt,” Halyk Finance senior analysts Sabit Khakimzhanov and Gulmariya Zhapakova said in a note to clients.

Delays at Kashagan and a sharp fall in oil prices have worsened Kazmunaigas’ financial affairs.

But, although unprecedented, the Central Bank’s purchase will change little in Kazakhstan’s oil sector. The two transactions may have helped Kazmunaigas achieve a better financial position in the short term, but both moves are temporary.

ENDS

(News report from Issue No. 242, published on Aug. 7 2015)

Kyrgyzstan cuts interest rates

JULY 28 2015 (The Conway Bulletin) – Kyrgyzstan’s Central Bank cut its main interest rate to 8% from 9.5% because of a slowdown in inflation. The Central Bank said annualised inflation was now hovering around 6%, nearly half the level seen at the beginning of the year. Kyrgyzstan, like the rest of the region, has been coping with the fall out of a decline in the Russian economy.

ENDS

(News report from Issue No. 242, published on August 7 2015)