JAN. 13 2016 (The Conway Bulletin) – Kazakhstan’s foreign and gold reserves fell to $27.2b at the end of December, their lowest level since August 2014, data from the Central Bank showed. Like other countries across the region, Kazakhstan has been propping up its tenge currency by selling its reserves. The tenge has halved in value over the past year.
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(News report from Issue No. 263, published on Jan. 15 2016)
DEC. 21 2015 (The Conway Bulletin) – Azerbaijan’s Central Bank cut the manat from its US dollar peg just before Christmas, immediately triggering a 50% fall in its value.
This was, in effect, the second currency devaluation by Azerbaijan in 2015. The manat started 2016 trading at 1.56 /$1, 50% lower than it had been a year earlier.
Speaking a couple of days after the un-pegging of the manat, Azerbaijani president Ilham Aliyev said officials had had no choice but to effectively devalue the manat.
“The main reason for the change in the manat’s rate was a decline in oil price by three times. It means that the change was inevitable,” Reuters quoted him as saying.
This is a major climb down from an earlier position held by Mr Aliyev and the Central Bank. At the start of 2015 he told media that a devaluation was definitely not on the cards only to order a 33% cut in the value of the manat in Feb. 2015.
Since then , in the past 10 months, the Azerbaijani Central Bank has spent billions of dollars trying to defend the value of the manat despite analysts warning that a devaluation was needed. When Kazakhstan ditched its own peg to the US dollar in August, triggering a 40% drop in the value of the tenge, this second devaluation of the manat became an inevitability.
Azerbaijan has been particularly exposed to the drop in oil and gas prices — down to 11-year-lows. Oil and gas sales make up around 95% of its export revenue and 75% of total government revenues. To counter the sharp fall in prices, down by around 75% since July 2014, the Azerbaijani government has slashed spending on infrastructure and social projects.
Fitch, the ratings agency, said the devaluation was needed but that it would hurt the banking sector.
“The sharp exchange rate adjustment eases the oil shock’s fiscal impact by boosting the local-currency value of oil revenues and a floating currency should help stabilise reserves,” it said. “The devaluation will hurt the banking sector, which has large amounts of foreign- currency denominated loans.”
The government has imposed currency controls over foreign exchange transactions. It said that people wanting to exchange over $500 worth of manat now needed to present a formal ID.
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(News report from Issue No. 262, published on Jan. 8 2016)
JAN. 6 2016 (The Conway Bulletin) – The Kyrgyz Central Bank sold $9.1m to prop up its ailing currency, media reported, its first intervention in 2016. Like the other countries of Central Asia, Kyrgyzstan has sold millions of dollars of its reserves to support its som. In December, media reported that it had intervened 17 times to prop it up.
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(News report from Issue No. 262, published on Jan. 8 2016)
JAN 6 2016 (The Conway Bulletin) – The proportion of cash in banks in Kazakhstan held in foreign currencies rose to 77.5% in November from 76.4% a month earlier, media reported quoting the Central Bank, highlighting people’s lack of confidence in the national currency. It has been a long-held Central Bank policy to try to persuade people to keep their savings in tenge. The tenge, though, lost around half its value in 2015.
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(News report from Issue No. 262, published on Jan. 8 2016)
JAN. 6 2016 (The Conway Bulletin) – The Tajik Central Bank imposed currency withdrawal restrictions on account holders as the Tajik somoni currency continued to lose value, media reported. It limited cash withdrawals to $400 per person. In December, the government closed down exchange kiosks, blaming them for pressuring the value of the somoni.
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(News report from Issue No. 262, published on Jan. 8 2016)
JAN. 7 2016 (The Conway Bulletin) — The New Year did not change the fortunes of currencies in the South Caucasus and Central Asia. All currencies are still suffering against a strong US dollar and Central Banks are intervening to prop them up.
Undoubtedly, the most notable decision came just before the holidays when Azerbaijan ditched its currency peg to the dollar and let the manat slide. After a 48% fall, the currency found its equilibrium at 1.55/$1. It is now trading at 1.57/$1.
In Kazakhstan, the tenge recovered towards the end of December, but it slid to 345/$1 in January.
Tajikistan witnessed the worst start of the year, with its somoni currency falling 2.5% in the first week of January, trading at 7.17/$1. Notably, exchange points have been charging a premium of 8-10% on currency transactions in the past few weeks.
In Kyrgyzstan the Central Bank has kept the som stable at 75.9/$1 by intervening several times.
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(News report from Issue No. 262, published on Jan. 8 2016)
JAN. 8 2016 (The Conway Bulletin) – Both Kazakhstan and Azerbaijan ditched their currencies’ peg to the US dollar in 2015, triggering sudden and sustained depreciation of their currencies.
These were tough, but necessary calls by their Central Banks as these currencies were over-valued compared to oil and the Russian rouble.
What happens next differentiates Azerbaijan and Kazakhstan.
Kazakhstan has allowed, with the odd intervention, its currency to devalue. The Azerbaijani Central Bank, by contrast and very much in keeping with the tight way that the country is run, appears determined to anchor the manat more-or-less at its current rate against the US dollar. The rhetoric may be of liberalisation but the actions are of a conservative and uptight Central Bank.
And this comes across in other ways too. A couple of weeks after the devaluation, Azerbaijan imposed a rule that only people presenting their official ID could change more than $500 into foreign currencies. This could be the first of many exchange controls.
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(Editorial from Issue No. 262, published on Jan. 8 2016)
JAN. 7 2016 (The Conway Bulletin) — After Azerbaijan abandoned its currency peg to the US dollar, leading to a second sharp depreciation of the manat in 10 months, confidence in South Caucasus and Central Asian currencies reached a new low.
2015 was a tough year, which began with Turkmenistan slashing 19% off the value of its manat currency on Jan. 1, hinting that oil and gas exporting countries were facing bad times.
The following February, Azerbaijan devalued its currency and later in August Kazakhstan stopped pegging the tenge to the US
dollar, a decision that triggered a sharp depreciation. But although this trend is closely linked to the fall in oil prices since the summer of 2014, that’s not the whole story.
After the rouble collapsed at the end of 2014, it was only a matter of time for countries that enjoyed high trade volumes with Russia. They had to follow suit and devalue their currencies to remain competitive.
In addition, devaluing and unpegging a currency may also serve as a way to give stability to the domestic budget.
Kazakhstan’s Central Banker Daniyar Akishev said the tenge will follow the price of oil. That way energy-exporting firms will have a chance of balancing their books.
But countries with unpegged currencies need to keep an eye on speculation. Azerbaijan now requires a valid ID for currency exchange of more than $500 in value. Tajikistan put in place limits to ATM withdrawals of $400 and could reduce the number of licences for exchange points.
And interventions are unlikely to cease. Kyrgyzstan and Georgia’s Central Banks have already marked the first week of 2016 with purchases in the currency market.
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(News report from Issue No. 262, published on Jan. 8 2016)
DEC. 18 2015 (The Conway Bulletin) – The Kazakh tenge fell to its record low against the dollar this week, after the US Federal Reserve decided to raise interest rates by a quarter of a percentage point, a move that will inevitably dent Kazakhstan’s fragile economy.
On the eve of the celebrations for the 24th anniversary of Kazakhstan’s independence, the tenge had already bottomed out at 337.8/$1 (Dec. 15). When trading re-started after two days of holidaying in Kazakhstan and an interest rate rise in the US, the tenge fell another 1.4% to hit 342.5/$1.
The tenge now trades at half its value in August, before the Central Bank ditched the Tenge-US dollar peg.
The Fed’s rate rise decision on Dec. 16 was expected, but it was still bad news for Emerging Markets.
And Kazakh state-owned companies seemtobeplanningforworsetocome.
An alleged official letter sent out by state-owned energy company Kaz- munaigas and leaked on social media, instructed its subsidiaries to draft plans for the period 2016-2020 accounting for oil prices at $30/barrel and a tenge/dollar rate of 360 (Dec. 14). Brent oil is currently trading at $36.70/barrel.
Kazmunaigas could not be reached for comment.
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(News report from Issue No. 261, published on Dec. 20 2015)
DEC. 15 2015 (The Conway Bulletin) – Tajikistan and China completed a currency swap deal which they had arranged earlier in the year. Under the deal, China will give Tajikistan 3b yuan (around $470m) in exchange for the equivalent in Tajik somoni. The two sides said the deal would facilitate bilateral trade but it is also a way for China to give Tajikistan some hard currency.
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(News report from Issue No. 261, published on Dec. 20 2015)
