Tag Archives: currency

IMF says that Georgia is well placed to weather financial storm

MARCH 5 2015 (The Bulletin) – Severe external shocks have hit Georgia’s economy causing it to falter and for growth to slow to a virtual standstill, the IMF said at the end of a mission to Tbilisi.

But the IMF said that because Georgia has been able to keep its government budget deficit under control it is better placed than other countries in the region to weather the economic storm triggered by a decline in oil prices and the drop in Russia’s economic health.

“We look forward to plans to accelerate reforms to make Georgia a more attractive place for doing business and for investing, for creating jobs, and for boosting growth in the future,” the IMF said in a statement.

“These should include easing recent restrictions on foreign businesses, seeking out new private investment, boosting saving through pension and capital market reforms and raising education standards.”

It also gave a much needed boost to Georgia’s Central Bank chief Giorgi Kadagidze who has been criticised for not doing enough to divert the country from a decline in the value of its lari currency.

“We need to protect independence of the central bank; they are doing a good job,” media quoted Mark Griffiths, who led the IMF mission as saying.
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(News report from Issue No. 222, published on March 11 2015)

Kazakhstan bans Russian oil products

MARCH 4 2015 (The Bulletin) – Kazakhstan banned the import of light oil products from Russia for 45 days from March 5 . The measure was brought in to stem the flow of Russian oil products, made cheaper by the fall in the value of the rouble, and to protect jobs and business at Kazakh refineries.
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(News report from Issue No. 222, published on March 11 2015)

Remittances to Armenia fall by 40%

MARCH 9 2015 (The Conway Bulletin) – Remittances to Armenia, a vital part of its economy, were 40% lower in January 2015 compared to January 2015, media reported quoting the Central Bank.

Like other countries in the Central Asia/South Caucasus region, Armenia’s economy is partially reliant on workers in Russia sending back cash for their families back in Yerevan and other Armenian towns and villages.

But the Russian economy has dipped over the past 12 months because of Western imposed sanctions and a sharp drop in global energy prices.

This has had a large knock-on effect. Armenia’s economy is especially tied-in to Russia’s financial health.

The data shows Armenia’s dependency on Russia in more detail. Total remittances to Armenia were $72m in January, compared to $122 in the same period in 2013. Of this, the amount from Russia fell 56% to $38m from $87m in 2015.

Economists have been lining up to say that economic growth in Armenia this year will measure around zero, below even the government’s estimates of 2% growth.
The ARKA news agency quoted economist Vilen Khachatryan.

“Given the strong dependence of Armenia on the Russian market we expect the negative developments in Russia and our region will lead to a reduction in turnover and unemployment among Armenian labour migrants in Russia which will in turn affect Armenia’s economy,” he said.

“If Russia fails to get out of the current crisis, Armenia’s economic growth this year will be zero.”
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(News report from Issue No. 222, published on March 11 2015)

Food prices in Georgia rise

MARCH 4 2015 (The Bulletin) – The price of staple foods in Georgia is rising, media reported. Interpressnews.ge said cooking oil, buckwheat, sugar, salt and other goods have all increased in price because of the devaluation of the Georgian lari. Economists have been warning that weakening economic conditions could trigger inflation.
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(News report from Issue No. 222, published on March 11 2015)

Kyrgyzstan-bound FDI dries up

MARCH 6 2015 (The Bulletin) – According to a recent publication by the Kazakhstan/Russia-funded Eurasian Development Bank (EDB), foreign investment in Kyrgyzstan in 2014 measured only $187m, down by 70% from 2013.

In 2013, the Central Asian country received over $623m in foreign direct investment (FDI), mainly from China, Russia, Britain, and Canada.

The EBD said the macroeconomic downturn which began in early 2014 was the main reason for the reduction of foreign activity. The recurring threat of nationalising the gold mine at Kumtor, together with monetary issues and galloping inflation, are also all factors.

The Kyrgyz government has tried to remedy the situation by increasing interest rates above 10% and protecting the national currency, the som, from the financial strains common throughout the region. Although it has performed better than the rouble, the som has lost over 20% against the dollar in the past six months.

FDI is a lifeline for countries like Kyrgyzstan, which rely on remittances from migrant workers abroad and capital injections from foreign investors.
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(News report from Issue No. 222, published on March 11 2015)

Georgia CBank wants loans restructured

FEB. 25 2015 (The Conway Bulletin) – Georgia’s Central Bank wants commercial banks to present plans to restructure US dollar loans to help them cope with the drop in the value of the lari. An estimated 60% of banks’ loans are held in foreign currencies making them more expensive to service.
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(News report from Issue No. 221, published on March 4 2015)

Azerbaijani manat devaluation hurts banks

FEB. 25/MARCH 2 2015 (The Conway Bulletin) – Ratings agencies warned that the 30% devaluation of the Azerbaijani manat last month would hurt the capitalisation of the country’s banks. Fitch said that most of debt held by Azerbaijani banks was in foreign currencies, making it more expensive for them to service.
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(News report from Issue No. 221, published on March 4 2015)

Max Petroleum suspends trading on AIM

MARCH 2 2015 (The Conway Bulletin) – The collapse in oil prices forced Max Petroleum, a British-Kazakh oil and gas company, to suspend trading on the London AIM stock exchange.

In a statement, Max Petroleum said it was in negotiations to restructure its debt with Sberbank and other creditors.

“If current negotiations are unsuccessful, or if other events outside the control of the Company require that the Company ceases trading while such negotiations are ongoing, then the consequences will be negative for all stakeholders in the Company,” the company statement said.

Last month Max Petroleum squarely blamed the slump in global oil prices for its problems which wiped out profit margins and deterred potential investors.

The Max Petroleum’s troubles are a microcosm of the problems facing Kazakhstan-orientated companies trying to weather an economic downturn linked to the oil price drop and the turmoil in Russia’s sanction-hit economy.

Almaty-based confectionery plant Rakhat, which South Korea’s LOTTE bought in 2013/2014 in a multi-million dollar deal, also said that it had had to lay off 500 of its 3,800 workers. It blamed unfair competition from cheaper Russian sweets.

Once feted as one of Kazakhstan’s most famous companies outside the extractive industries, Rakhat is now trying to eke its way out of the economic storm — just like most other Kazakh companies.

Max Petroleum, listed on the LSE since 2005, is a small Kazakhstan oil producer with an output of around 200,000 tonnes of oil a year.

In August 2014, AGR Energy, linked to the prominent Assaubayev family, made a deal to buy 51% of Max Petroleum for £37m ($62m), promising to embark on a significant investment to revitalise the company. The slump in oil prices, though, appears to have deterred AGR Energy from follow through with the deal and the promised investment.
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(News report from Issue No. 221, published on March 4 2015)

Armenia asks Gazprom for gas deal

FEB. 25 2015 (The Conway Bulletin) – Armenia has asked Russia not to raise the price it pays for gas despite a drop in the value of its dram currency, media reported quoting the head of the Public Services Regulatory Commission (PSRC) Robert Nazaryan.

Russia’s Gazprom owns the gas distribution system in Armenia and can, therefore, dictate the price that Armenians pay for their gas.

The worry for officials in Armenia is that the dram lost around 15% of its value against the US dollar at the end of last year. Energy prices are set in US dollars, making it more expensive for people in Armenia to buy.

“In this connection at this moment the Armenian side is conducting negotiations with the Russian side for the natural gas price not to be raised because of the dram-dollar fluctuations,” media quoted Mr Nazaryan as saying.

Russia dominates Armenia’s economy and by asking Gazprom to keep the cost of gas consistent, Mr Nazaryan is effectively asking for a subsidy. If Gazprom agrees, Armenia will fall further under the control of the Kremlin.
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(News report from Issue No. 221, published on March 4 2015)

Georgia’s Ivanishvili criticises CBank chief

FEB. 26 2015 (The Conway Bulletin) – Bidzina Ivanishvili, Georgia’s former PM and its richest and arguably most powerful man, accused Central Bank chief Giorgi Kadagidze of not doing enough to protect the country from the economic downturn enveloping the region.

Inflation is rising in Georgia, the lari currency is falling in value and businesses are worried. This has all heaped pressure on the 34-year-old Mr Kadagidze, who has been in the top job at the Central Bank since 2009.

Mr Ivanishvili’s intervention will pile on more pressure.

“The Governor of the NBG (National Bank of Georgia), Giorgi Kadagidze, who was appointed by the previous government, led us with his inactivity and incorrect actions to the lari crisis,” he said in a statement released through an NGO he has set up.

A fall in oil prices and economic turmoil in Russia have triggered inflation across Central Asia and the South Caucasus.

Some economic experts argue that Georgia’s Central Bank could have done more to dampen the inflation; others have said the government is merely looking for a scapegoat and that Mr Ivanishvili’s intervention is destabilising.

Vakhtang Charaia, director of the Center for Analysis and Forecast at Tbilisi State University, said: “Ivanishvili’s statement could lead to political instability, which in turn would negatively affect Georgia’s investment climate.”
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(News report from Issue No. 221, published on March 4 2015)