Tag Archives: central bank

Kazakh Central Bank says to buy KKB bad debt

ALMATY, MARCH 15 2017 (The Conway Bulletin) — Kazakhstan’s Central Bank confirmed that it would buy up 2.4 trillion tenge ($7.5b) of bad debt owned by Kazkommertsbank, effectively subsidising its purchase by Halyk Bank.

Halyk Bank, owned by the daughter and son-in-law of Kazakh president Nursultan Nazarbayev, agreed to buy Kazkommertsbank earlier this year for an undisclosed amount in a deal that will give it a 38% market share and Kazakhstan’s elite control of the banking sector.

The 2.4 trillion tenge bad debt held by Kazkommertsbank is a legacy of its purchase of BTA Bank from the government. The government had

bought it in 2008/9 when it was about to collapse during the Global Financial Crisis.

Separately, deputy Central Bank chairman Oleg Smolyakov said it would take two to three months for Halyk Bank to carry out its due diligence of Kazkommertsbank before the takeover could be completed.

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(News report from Issue No. 321, published on March 20 2017)

Currencies: Azerbaijani manat

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MARCH 20 2017 (The Conway Bulletin) — The Azerbaijani manat continued its strong return to form, pushing up to 1.7286/$1 by March 17, its strongest level against the US dollar since the beginning of November 2016.

At its weakest point, the manat had been valued at 1.9517/$1 in February, meaning that it has strengthened by nearly 11.5%.

The European Bank for Reconstruction and Development (EBRD) has said that this manat strength is probably due to a transfer of 7.5b manat ($4.3b) from the SOFAZ, the state oil fund, to the Central Bank to boost the economy. The Azerbaijani economy has been looking fragile, because of the depressed price of oil, and it has needed the cash injection.

The Kazakh tenge and the Georgian lari also rose marginally in value throughout the week, although the Kyrgyz som and the Tajik somoni fell in value. The Kyrgyz som is surfing near its lowest point since mid-September 2016.

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(News report from Issue No. 321, published on March 20 2017)

Kazakh C.Bank loans Delta $31m

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MARCH 7 2017 (The Conway Bulletin) — As part of its well-publicised plan to help its struggling banking sector, the Kazakh Central Bank said that it had loaned Delta Bank, one of the smaller banks in Kazakhstan, 9.8b tenge ($31m), media reported. The loan, made on March 3, was linked to a missed coupon repayment that Delta Bank had needed to pay. This was connected to pension obligations.

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(News report from Issue No. 320, published on March 13 2017)

Kazakhstan cuts interest rates as economy improves

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ALMATY, FEB. 20 2017 (The Conway Bulletin) — Kazakhstan’s Central Bank cut its key interest rate by one percentage point to 11%, its lowest level since it introduced its this key rate in September 2015, and delivered one of its most upbeat assessments of the economy for years.

Central Bank chief Daniyer Akishev said that improved global economic outlook, a rise in oil prices and a slowdown in inflation had allowed him to cut the rate. At the beginning of last year, Kazakhstan’s interest rate had measured 17%.

Both the rate cut and the renewed confidence in the economy will be a relief to investors and to ordinary Kazakhs who have had to deal with an avalanche of grim economic data since oil prices collapsed in mid-2014.

“We took into account the positive impact of external factors. Sustainable world oil prices above $50 per barrel, improving global eco- nomic prospects and moderate inflationary background in our trading partners,” Mr Akishev told journalists.

“Among internal factors there has been a significant slowdown in inflation, which creates lower inflationary and devaluation expectations amongst people, as well as the ongoing de-dollarisation of bank deposits.”

Inflation had been a major worry after the tenge devalued by 50% in 2015. It had started to rise fast last year but has since slowed and the Kazakh Central Bank said that it would ease to between 6.5% and 7% this year from 8.5% last year (Feb. 22). The Central Bank also said that inflation in 2018 could drop as low as 5%.

The Kazakh economy is the biggest in Central Asia and is an important driver of regional economic growth.

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(News report from Issue No. 318, published on Feb.24 2017)

Armenia’s C.Bank cuts interest rate

FEB. 14 2017 (The Conway Bulletin) — Armenia’s Central Bank cut its key interest rate yet again to 6% from 6.25%, hoping to give its economy a boost. Armenia has now slashed its interest rate from 10.5% in 2015. The Central Bank’s biggest worry is deflation. Annualised deflation in January measured 0.6%, the Central Bank said.

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(News report from Issue No. 317, published on Feb.17 2017)

Comment: Central Banks face mess of their own making, says Kilner

FEB. 17 2017 (The Conway Bulletin) — First came the oil price collapse, then remittance flows started stagnating and (some) currencies (think of the tenge and the Azerbaijani manat) halved. Now the debt mountain, or perhaps debt tsunami is a better description, looms large, threatening to drown the countries of Central Asia and the South Caucasus.

Kazakhstan is the latest to propose a major bailout of its banking sector. Finance minister Bakhyt Sultanov said on Feb. 13 that the government would potentially use $6.3b to prop up banks listing under the weight of bad loans. The Tajik government is in talks with the IMF to borrow cash to help prop up its banking sector and in Azerbaijan the government has been, as quietly as possible, buying up chunks of the biggest bank. It now owns more than 76% of the International Bank of Azerbaijan, allowing it to smooth out its debt crisis without attracting too much attention.

Ratings agencies and analysts have been warning of this denouement.

As long ago as December 2015, Standard & Poorsratings agency said: “Medium-term prospects for Kazakhstan’s banking system have deteriorated in 2015 due to lower oil prices, the economic slowdown (especially in non-extractive sectors) and the weaker tenge.”

And that prediction has been borne out.

The frustration is that we have been here before. In the Global Financial Crisis of 2008/9 bad debt built up in banks in Kazakhstan forcing the government to step in. It bought out BTA Bank, at the time one of the country’s biggest lenders, and a handful of smaller banks. It was expensive but staved off disaster and the Kazakh government pledged not to find itself in a similar position again.

The government finally offloaded BTA bank to pro-government businessmen in 2014/15 and proposed to impose rules and regulations that would require its banks to bulk up their capital and refrain from handing out loans, mainly mortgages, to people unworthy of them.

Clearly, the Kazakh Central Bank and other regulators across the region, have failed. Certainly they have not been helped by the sharp currency devaluation that made US dollar-denominated mortgages unserviceable.

Better macro-economic policies, tighter rules on lending and a more clear-headed approach to dealing with problems would surely have put the Central Banks in better positions than they now find themselves. Governments in the region are once again having to buy themselves out of trouble.

By James Kilner, Editor, The Conway Bulletin.

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(News report from Issue No. 317, published on Feb.17 2017)

Kazakh central banker wants to support banks

FEB. 3 2017 (The Conway Bulletin) — Kazakhstan’s Central Bank chief Daniyer Akishev said that he wanted to use state funds to prop up big banks that are listing under the pressure of an economic downturn linked to a drop in oil and gas prices and a recession in Russia. He told a government meeting that the Central Bank was going to evaluate the quality of the banks’ assets later this year.

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(News report from Issue No. 315, published on Feb. 3 2017)

Georgian Central Bank raises interest rates

TBILISI, JAN. 25 2017 (The Conway Bulletin) — Georgia increased its key interest rate by 0.25% to 6.75%, its highest level since September 2016, because it said that inflation was beginning to pick up again.

The data shows that consumer demand in Georgia is still weak, year- on-year prices rises in December were measured at 1.8%, but the Central Bank said that its forecasts showed inflation rising throughout the rest of the year.

“The monetary policy decision is based on the macroeconomic forecast, according to which while demand side pressure on prices is weak, inflation is expected to be above its target rate for the most of the 2017,” it said in a statement.

Georgia’s inflation target was 5% for 2016 and is 4% for 2017.

Georgia has cut taxes on reinvested company profit, pledged to invest an extra 600m lari ($225m) in infrastructure projects and cut a free- trade deal with China.

Also on Jan. 25, Bloomberg News published an interview with Georgian finance minister Dimitri Kumsishvili. He said that a blend of tax cuts and spending on infrastructure would help Georgia’s economy grow by more than the predicted 4%.

Last year, weighed down by a collapse in the value of its currency a recession in Russia and the poor economic condition of its neighbours Azerbaijan and Armenia, annual GDP growth in Georgia measured 2.7%.

Since June 2016, Georgia’s lari currency has lost 21% of its value. The Georgian Central Bank has largely refused to buckle to demands to spend wildly to support the lari’s value and Mr Kumsishvili was adamant that the best way to strengthen it was through the economy.

“Strengthening the economy is the answer for the lari rate, this is the main task,” he told Bloomberg.

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(News report from Issue No. 314, published on Jan. 27 2017)

Kazakh Central Bank keeps rates steady

JAN. 9 2017 (The Conway Bulletin) — Kazakhstan’s Central Bank held its key interest rate as 12% at its first monetary session of 2017 but hinted that cuts would come later in the year to boost economic activity. The challenge for the Kazakh Central Bank is to boost economic activity without undermining confidence in its tenge currency.

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(News report from Issue No. 312, published on Jan. 13 2017)

Armenia’s CB cuts interest rates

DEC. 27 2016 (The Conway Bulletin) — Armenia’s Central Bank cut the country’s key interest rate by 25 basis points to 6.25%, continuing to slash the cost of borrowing. Armenia’s interest rate measured 8.75% at the beginning of 2016 but was steadily cut to stimulate prices rises and economic growth.

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(News report from Issue No. 311, published on Jan. 6 2017)