Tag Archives: currency

Kazakhstan to give state workers pay rise, stoking inflation

NOV. 10 2015 (The Conway Bulletin) – State workers in Kazakhstan will receive pay rises next year of 7-29% to offset the devaluation of the tenge, media reported quoting social development minister Tamara Duysenova. The figures show just how pronounced the anticipated devaluation-linked inflation is likely to be.

The tenge has fallen by 40% in value since its US dollar peg was ditched in August and analysts have warned of a corresponding surge in inflation.

This has already begun to seep through. The Central Bank said that annualised inflation jumped to 9.2% in October, double the rate in September. The announcement on the size of the state pay rises, though, suggests more price rises are likely.

Most of the state employees that Ms Duysenova said would receive a pay rise were doctors, nurses and teachers.

ENDS

(News report from Issue No. 256, published on Nov. 13 2015)

Business comment: A dangerous ripple effect

NOV. 13 2015 (The Conway Bulletin) — The whole post-Soviet region has faced a steep economic downturn over the past year, leading to regional trade imbalances that have travelled across borders.

Initially, the fall in the value of the Russian rouble hit the Kazakh tenge. Despite a 20% devaluation in Feb. 2014, the tenge’s peg to the US dollar made it increasingly expensive against the rouble. When the rouble started to lose double- digit value against the US dollar, the tenge held its US dollar trading point, making it increasingly expensive. For the first eight months of this year, cheap Russia goods flooded Kazakhstan.

Eventually, in August, the Kazakh Central Bank effectively ordered another devaluation by ditching a US dollar peg. The graph below illustrates this clearly. It shows the rouble/$1 rate and the rouble/tenge rate matching each other until August. The value of the rouble, according to the graph, halves against the US dollar and the tenge.

In August, though, there is a sharp correction in the trading rate of the rouble/tenge. It diverges, violently almost, with the rouble/$1rate. The graph shows that the tenge is still stronger than the rouble compared to June 2014, but the differential is reduced.

And this is where the ripple effect carried through to neighbouring Kyrgyzstan.

Thee blue line on the graph represents the rouble/som rate. It, broadly, matches the peaks and troughs of the rouble/$1 rate, suggesting an informal peg to the US dollar.

The Kyrgyz Central Bank, though, has clearly tried to devalue the som independently too, as the rouble/som rate diverges slightly from the rouble/$1 rate.

The yellow line shows the tenge/som rate, and clearly depicts the change in relative values of the two neighbours’ currencies. The som has been weaker against the tenge for most of the year, as shown by the fairly shallow but pronounced trough. This changes after the tenge devaluation in August.

A currency domino effect, although slower than analysts had predicted, is rippling through Central Asia. The rouble is an optimal benchmark to observe this phenomenon.

ENDS

(News report from Issue No. 256, published on Nov. 13 2015)

Kazakhstan helps mortgage holders

NOV. 9 2015 (The Conway Bulletin) – Under a scheme designed to help people in Kazakhstan who hold mortgages in US dollars cope with the devaluation of the Kazakh tenge, the Central Bank said that it had refinanced 3,500 mortgages by Nov. 1. The programme will run until March or April 2016.

ENDS

(News report from Issue No. 256, published on Nov. 13 2015)

Inflation spikes in Kazakhstan

NOV. 2 2015 (The Conway Bulletin) – Inflation in Kazakhstan grew by 5.2% in October, compared to the previous month, after businesses increased their prices on goods and services across the country to balance a devaluation in the value of the tenge currency. The tenge has now lost half its value against the US dollar since Feb. 2014. Year-on- year inflation now stands at 9.4%.

ENDS

(News report from Issue No. 255, published on Nov. 6 2015)

Low oil prices and rising costs hit KMG EP profit

NOV. 5 2015 (The Conway Bulletin) — London-traded KMG EP said sustained low oil prices had halved revenues in the first nine months of the year compared to the same period in 2014, a heavy warning for Kazakhstan that the near-term outlook for its economy is poor.

KMG EP saw its revenues fall, in US dollar terms, by 54% to 349b tenge ($1.8b), mirroring a 48% fall in Brent oil prices. Net profit dropped to 138b tenge ($703m), a fall of 49% in US dollar terms.

And it said that oil prices would remain weak.

“There is a risk that prices for the domestic market supplies for October to December 2015 will be significantly lower than the prices set in September 2015,” KMG EP said in the report.

KMG EP is among the top three producers of oil in Kazakhstan and participates in several international oil and gas projects.

It’s one of the Kazakh government’s main cash earning companies and its financial performance acts as a barometer on Kazakhstan’s economy. If Kazmunaigas, and KMG EP, is doing well, the Kazakh economy is generally doing well too.

KMG EP also said that in tenge terms, its salary costs have increased by 22%.

“This was largely due to an indexation of salary for production personnel by 7% in January 2015, the introduction of a Unified System of Wages for production employees from April 2014 onwards, a 10% increase in wages related to the devaluation of the Tenge from April 2014 onwards, and an increase in production bonuses from 25% to 33% for supporting production personnel from September 2014 onwards,” KMG EP said.

The Kazakh Central Bank stripped the tenge of its peg to the US dollar in August, effectively allowing the currency to devalue by 25%,a second devaluation in two years which has halved the tenge’s value. Businesses have had to promise employees salary increases to compensate for the fall in the value of the tenge, pushing up inflation across the country.

ENDS

(News report from Issue No. 255, published on Nov. 6 2015)

Azerbaijani currency reserves fall

NOV. 5 2015 (The Conway Bulletin) – Azerbaijan’s foreign currency reserves fell 3% in September to just over $7b, media reported, highlighting just how much cash the Central Bank has spent propping up the manat. Azerbaijan’s Central Bank has now spent half its currency reserves in the past year.

ENDS

(News report from Issue No. 255, published on Nov. 6 2015)

Georgia’s Central Bank raises interest rates

NOV. 4 2015 (The Conway Bulletin) – Georgia’s Central Bank increased its key interest rate to 7.5%, its highest level since Sept. 2011, to try and dampen rising inflation.

In January, Georgian interest rates were 4%, demonstrating just how aggressively its Central Bank has pushed up the cost of borrowing.

In a statement, the Georgian Central Bank said that Consumer Price Inflation now measured 5.8%, pushed up by a rise in the cost of imported goods and a jump in electricity prices.

“According to the current forecast, in the beginning of 2016 the inflation will remain above its target value, will start decreasing afterwards and will return to its target value of 5% in the second half of 2016,” the Central Bank said in a statement.

This year, similarly to other cur- rencies in the region, the Georgian lari has lost around 28% of its value.

ENDS

(News report from Issue No. 255, published on Nov. 6 2015)

Kazakh president sacks Central Bank chief

NOV. 2 2015 (The Conway Bulletin) – Kazakh President Nursultan Nazarbayev sacked Kairat Kelimbetov as head of the Central Bank, two years after he was handed the job.

He promoted 39-year-old Daniyar Akishev, a former deputy head of the Central Bank and his personal economic adviser, to take over from Mr Kelimbetov.

Under Mr Kelimbetov’s watch a combination of low oil prices and a recession in Russia has battered Kazakhstan’s economy. The tenge currency has lost around half its value since Feb. 2014.

Mr Nazarbayev said that he had lost confidence in Mr Kelimbetov. “The lack of confidence in the economy and the national currency — the tenge — should not be allowed to continue,” he said in a statement on his website. “It’s important to work to fix this poor performance.”

The Kazakh Central Bank has lost credibility over the past couple of years. It has flip-flopped on monetary policy and has spent billions of US dollars propping up its currency before defaulting first in Feb. 2014 and then in August this year.

On each occasion, events have appeared to wrong-foot Mr Kelimbetov.

In 2014, he admitted at a press conference after the devaluation that he hadn’t expected it to happen. In August he said that the tenge had moved to a free float against the US dollar before presiding over several more interventions to prop up its strength.

But news that he had been sacked failed to halt the slide in the value of the tenge. By Friday, Nov. 6, it had touched an all-time low against the US dollar of 310/$1.

Inflation data for October presented Mr Nazarbayev and his advisers with more bad news. Pushed up by the devaluation in August, inflation for the year to end-October measured over 9%.

And the disorganisation surrounding the Central Bank also appeared to continue. Shortly after it released a statement saying it would no longer spend millions of US dollars propping up the tenge, the Central Bank cancelled its monthly interest rate meeting without giving a reason or setting a new date.

ENDS

(News report from Issue No. 255, published on Nov. 6 2015)

Currencies: Kazakhstan’s tenge, Kyrgyzstan’s som

NOV. 5 2015 (The Conway Bulletin) — The tenge finally broke through the 300/$1 level this week. People in Kazakhstan watched their currency lose ground against the US dollar on Thursday and Friday, while the Central Bank, under a new leadership, refrained from any intervention. The official exchange rate reached the record-breaking level of 310/$1 late on Friday, an 11% fall in one week.

The Kyrgyz som lost 1% of its value in one week, hitting 70/$1 on Friday.

Other currencies in the region remained stable throughout the week.

In a rare statement, the Uzbek Central Bank said it would let the sum devalue faster in 2015, compared to 2014. The official exchange rate, currently at 2,692/$1, showed a 10% fall in the first 10 months of the year. But this is about half the unofficial rate. On the black market, $1 can be purchased for as much as 5,900sum, according to the dollaruz.com website.

ENDS

(News report from Issue No. 255, published on Nov. 6 2015)

Kazakh parliament passes mortgage bill

NOV. 5 2015 (The Conway Bulletin) – The Kazakh parliament passed a bill which will ban mortgages being given in US dollars unless the applicant earns his or her salary in US dollars. The aim of the bill, which needs to be signed by Pres. Nursultan Nazarbayev before becoming law, is to reduce households exposure to potential bad debt and to give the ailing tenge currency a boost.

ENDS

(News report from Issue No. 255, published on Nov. 6 2015)