Tag Archives: central bank

Uzbekistan warns that inflation is accelerating

TASHKENT, JUNE 24 2017 (The Bulletin) — Inflation in Uzbekistan is accelerating fast, the country’s Central Bank said in a rare statement giving economic guidance.

Uzbekistan is Central Asia’s most populous country and the admission will alarm other neighbouring governments who have been hinting at inflationary pressures built into their economies.

As well as warning of inflationary pressures, Uzbekistan’s Central Bank also said that it was pushing up its key interest rate to 14% from 9%, although it was unclear how much impact this rise would have on an economy underpinned by government support and the Black Market.

“This decision is due to an acceleration of inflation over the past period and the need to limit the increased inflationary risks,” the Uzbek Central Bank said in a statement.

“Along with the seasonal fluctuations and supply factors, inflation has been influenced by monetary factors such as the acceleration in lending of the national currency into the economy and its devaluation compared to previous years.”

The unusually frank guidance from the Central Bank may also be linked to both a change in Central Bank chief and a shift in the Uzbek government’s mindset.

Fayzulla Mullajanov, Central Bank chief since independence from the Soviet Union in 1991 and a relic from a Soviet-tinged bygone era, died in May. Parliament has approved Mamarizo Nurmuratov as his replacement.

Mr Nurmuratov is another long- serving Central Bank insider and had been Mr Mullajanov’s adviser but he may have been told to open up the reclusive institution by President Shavkat Mirziyoyev. Mr Mirziyoyev has appeared determined to open up Uzbekistan since taking over from Islam Karimov in September last year.

The Uzbek Central Bank’s statement also referenced the depreciation of its currency. It has steadily managed a drop in value of the Uzbek soum of around 0.7% per week over the past year. In the last 12 months it has dropped by around a third to trade, officially, at 3,930/$1. On the Black Market, the soum is trading at 8,300/$1, according to uzdollar.com.

Uzbekistan’s economic woes are mirrored across the region. A drop in oil prices in 2014, reduced the value of its gas exports and triggered a recession in Russia. Uzbekistan, like its Central Asian neighbours, relies on Russia as an economic driver, creating jobs and markets. Remittances from Russia have picked up but are still at a third of the level of 2014.

ENDS

(News report from Issue No. 334, published on June 26 2017)

Georgia’s CB keeps interest rate at 7%

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JUNE 14 2017 (The Bulletin) — Georgia’s Central Bank said that it was keeping its key interest rate at 7% because of stubbornly high inflation. It said that inflation in May was 6.6%, above its 4% annual target, although it also said that it expected the rate of price rises to drop in the second half of the year. Higher taxes and increased prices for imported goods have pushed up prices in Georgia this year. Georgia had slashed rates last year to 6.5% from 8% but started to raise it again in January.

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(News report from Issue No. 333, published on June 19 2017)

Armenia’s CB raises inflation target

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MAY 31 2017 (The Bulletin) — Armenia’s Central Bank raised its inflation target for 2017 to 2.5% from 0.6%, a leading indicator that it feels the worst of an economic downturn has passed. Armenia has been struggling to deal with deflation over the past couple of years. Recent data showed the economy starting to grow. The government targets 3.2% growth.

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(News report from Issue No. 331, published on June 5 2017)

More Azerbaijani banks rely on state support to survive

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MAY 30 2017 (The Bulletin) — Five more Azerbaijani banks are currently failing to meet their capitalisation requirements, Rufat Aslani, head of the Financial Markets Supervisory Authority told media, suggesting more weakness in the sector.

In May, Azerbaijan’s biggest bank, the International Bank of Azerbaijan, which is 80% owned by the government and has a market share of around 60%, said that it needed to restructure its debt to stave off bankruptcy.

Now, after a series of small banks merged or went bankrupt in 2016, it has emerged that five mid-sized banks are still under the special supervision of Azerbaijan’s Financial Market Supervisory Authority.

“Today, under our supervision, there are five banks, capitalisation programs of which should be completed by mid-2017,” media quoted Mr Aslani as saying at a banking conference in Baku.

Mr Aslani did not name the banks but the Business New Europe magazine named three of them as Unibank, AtaBank and DemirBank — all mid-sized banks. None of the banks responded to requests for comment. The EBRD owns a 25% stake in DemirBank and Dutch development finance company FMO owns a 10% stake.

The Central Bank has imposed increased capitalisation rules to strengthen the sector. A recession in Russia and a collapse in oil prices since 2014 have halved the value of the Azerbaijani manat and heavily dented the banking sector.

Analysts had warned that Azerbaijani banks have been too relaxed about lending.

The currency devaluation and poor economic conditions have triggered a surge in bad debt which Moody’s, the rating agency, said stood at 30% of the banking sector’s loan portfolio.

ENDS

(News report from Issue No. 331, published on June 5 2017)

Uzbekistan’s long-serving Central Bank chief dies

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MAY 28 2017 (The Conway Bulletin) — Uzbekistan’s Central Bank chief, Fayzulla Mullajanov, died on May 24. He was 67-years-old and was perhaps the world’s longest serving Central Bank chief, officially holding the position since independence from the Soviet Union in 1991.

According to media reports, Mullajanov had been suffering from a kidney disease for sometime. In 2013 Ferghana News even reported that Mullajanov had fallen into a coma. This was denied but it is doubtful that Mullajanov has exerted much influence over Uzbekistan’s monetary policy in the last few years — either because he hasn’t been well enough or he simply hasn’t been empowered.

Appointed by Islam Karimov to head the Central Bank, Mullajanov was your archetypal Soviet-style official, prepared to put on a brave face and carry through decisions made by others.

He didn’t make monetary policy but he was expected to sell it.

This was clear from a US embassy report from May 2009 published, later, by Wikileaks.

In the cable, the US ambassador to Uzbekistan at the time, Richard Norland, recounted a series of meetings he had with senior Uzbek officials during a trip to Tashkent by deputy assistant US trade representative Claudio Lilienfeld. Mullajanov featured in the dispatch but only towards the bottom.

“After listening to a half hour recitation of Uzbekistan’s economic success and successes in the banking sector, Lilienfeld remarked that a major disincentive for US businesses to invest in Uzbekistan is the difficulty with capital convertibility,” Norland wrote.

“Expressing surprise that convertibility could be an issue, Mullajanov responded that conversion is done by the commercial banks. He assured us that he would personally look into any convertibility problems if they are brought to his attention in writing.”

Nothing more was said of Mullajanov in the memo, but Norland’s exasperation towards the Uzbek Central Banker was tangible. Mullajanov had been rolled out to sell Uzbekistan as a serious economy to the visiting US delegation. The reality was, as everybody knew, Karimov called the shots.

Uzbekistan’s monetary policy is dominated by its currency and this is set by central government. Mullajanov, who had only ever worked at the Uzbek Central Bank, was the face of this policy but not the architect.

ENDS

(News report from Issue No. 330, published on May 28 2017)

Head of Uzbek Central Bank dies

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MAY 24 2017 (The Conway Bulletin) — The head of Uzbekistan’s Central Bank, Fayzulla Mullajanov died aged 67 from complications linked to kidney disease, media reported. Mullajanov had been head of the Central Bank for 14 years and retained his position when Shavkat Mirziyoyev took over as president after Islam Karimov died in September 2016. In reality, the Uzbek Central Bank has little independence from central government.

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(News report from Issue No. 330, published on May 28 2017)

Georgia’s Central Bank raises rates

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MAY 2 2017 (The Conway Bulletin) — Georgia’s Central Bank raised interest rates to 7% from 6.75%, its highest rate since June 2016, because of supply-side price pressure. One of the Central Bank’s key remits is to keep inflation at 4% and it said that one- off price rises, such as an increase in excise duties, were pushing up prices. It also said, though, that it didn’t expect any more interest rate rises this year. Annualised inflation in March was 5.4%.

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(News report from Issue No. 327, published on May 5 2017)

Panic fuelling monetary crisis, says Tajik CBank

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APRIL 13 2017 (The Conway Bulletin) — Tajikistan’s Central Bank said that panic speculation was driving up the cash exchange rate against the official rate to dangerous levels. The Reuters news agency said that the official somoni rate was 8.49 somomi/$1 compared to 8.9/$1 at cash exchanges. Tajikistan’s banking system has been teetering on the verge of collapse, only propped up by the government.

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(News report from Issue No. 325, published on April 17 2017)

Comment: The green shoots of a recovery are visible

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APRIL 6 2017 (The Conway Bulletin) — In Edinburgh, where The Conway Bulletin has its editorial HQ, the green shoots of a timid spring are finally beginning to breakthrough after a long, grey winter.

And it’s the same scenario for the economies of Central Asia and the South Caucasus. A deep, bleak winter has enveloped them since mid-2014 but now, finally, data suggests a revival is on the horizon.

In this week’s newspaper, we report that both the Kyrgyz and Armenian Central Banks have kept their key interest rates steady. This, in itself, is a victory. Armenia has been furiously cutting its rates from a high of 10.5% in 2015 to 6% to try to stimulate growth and beat deflation. Now it says this policy has gone far enough and that inflation of around 4% is predicted this year.

In Kyrgyzstan, the economic news is even more upbeat. In its statement explaining just why it had kept interest rates steady, the Central Bank said that it was no longer having to intervene in the money market to keep the som currency from sliding. It also said that the economy had grown by 5.4% in January and February compared to the same period in 2016.

Armenia and Kyrgyzstan are two of the smaller economies in the region but the larger economies are also reporting positive news.

In Georgia, the statistics agency said that the economy had grown by 4.8% in the first two months of the year, pushed up by a growth in exports and an all- important rise in remittances. Georgia may also be benefiting from several local factors. Improved relations with Russia have given exports a major boost, especially wine, and the scrapping of visa regulations for Iranians has encouraged a large rise in tourists and business trips.

For the region’s two major economies the data has been less flattering, although there are still signs of improvements. In Azerbaijan, there is disagreement between economists on whether its economy will grow or not after it shrank by 3.8% in 2016. It’s dependent on oil, and prices are currently hovering around $50/barrel, above the anticipated $40/barrel.

In Kazakhstan, the Central Bank last month cut its interest rate and gave its most upbeat assessment of the economy, pointing out that inflation was under control and growth was expected.

And if you’re still not convinced about those green shoots of economic recovery, and that’s understandable as, just like a Scottish spring, they are fragile, take a look at the Azerbaijani manat and the Kazakh tenge. They are both up against the US dollar by more than 5% this year.

By James Kilner, Editor, The Conway Bulletin

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(News report from Issue No. 323, published on April 6 2017)

Kyrgyz economy is improving, says C.Bank

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MARCH 27 2017 (The Conway Bulletin) — Kyrgyzstan’s Central Bank kept its key interest rate steady at 5%, half the level it was 12 months ago, citing an improvement in the economy and a slowdown in inflation. Importantly it said that the economy had grown in the first two months of the year and that the som currency had stabilised without the Central Bank’s interference. Currencies and economies in the Central Asia/South Caucasus region have been hit hard since 2014 by a recession in Russia and fall in oil prices.

ENDS

(News report from Issue No. 323, published on April 6 2017)