DEC. 2 2014 (The Conway Bulletin) – Kazakhstan’s gold and foreign currency reserves have grown by 15.8% this year, media reported quoting the Central Bank’s press service. This war-chest is important because the Central Bank has said it is prepared to spend to defend the tenge currency against falling oil prices and a drop in the Russian rouble.
ENDS
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(News report from Issue No. 211, published on Dec. 3 2014)
NOV. 24 2014 (The Conway Bulletin) – Armenia’s Central Bank said it was prepared to spend millions of dollars propping up its currency, the dram, despite increased pressure to devalue.
Like other currencies across the South Caucasus and Central Asia region, falling oil prices and a devaluation in Russian rouble are pressuring the dram.
On Monday, Nov. 24, the dram was trading at 435 to $1, down 4% from Friday.
“The Central Bank reserves are enough to prevent any artificial fluctuations of the rate and secure financial stability,” the Central Bank said in a statement.
Perhaps but the warning signs are increasing and even the Central Bank’s statement smacks of desperation.
In the last three weeks, Reuters reported, the Armenian Central Bank has spent over $60m defending its currency.
Armenia is tied into Russia, politically, economically and emotionally. It has agreed to join the Kremlin’s Eurasian Economic Union in January and Russian business virtually runs the economy.
With oil prices and the rouble falling further it can only be a matter of time before currencies such as the dram also tumble again.
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(News report from Issue No. 210, published on Nov. 26 2014)
NOV. 15 2014 (The Conway Bulletin) – The Tajik somoni currency has fallen by 7% against the US dollar this year and 2% in the last week, mainly due to the falling value of the Russian rouble, threatening its economic stability. Remittances from Russia account for around half of Tajikistan’s GDP.
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(News report from Issue No. 209, published on Nov.19 2014)
NOV. 12 2014 (The Conway Bulletin) – The Uzbek sum currency has fallen to its lowest levels against the US dollar in independent Uzbekistan’s 23 year history, pushing up the price of food and threatening social stability.
On the Black Market, an essential measure of currency rates, the exchange rate in Tashkent hit the 3,450 sums to $1. The skyrocketing currency price is a mirror of Russia’s economic troubles.
A Tashkent resident told the Conway Bulletin that a kilogram of mutton now costs between 25,000 and 30,000 sums, compared to 20,000 sums in the summer.
Prices of bread, sugar and grain-based cereals have also risen by roughly 25% over the past three months, he said.
“As if the recent increase in utility costs was not frustrating enough, the government’s inaction to stem price increases because of a foreign currency adds insult to injury,” the source said.
The Tashkent resident was referring to a 10% increase imposed by the government on utility prices on Oct. 1.
This insight is important because it provides a first- hand snapshot of how frustration is building in Uzbekistan over food price increases and the rising cost of utilities.
Ordinary Uzbeks have also had to put up with fuel and gas shortages. Social pressure is building.
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(News report from Issue No. 209, published on Nov.19 2014)
NOV. 19 2014 (The Conway Bulletin) – In Kazakhstan, November 15 is the Day of the National Currency, a little-known holiday for workers in the financial sector.
With the Kazakh tenge under pressure again despite a 20% devaluation earlier this year, they and the national currency will be grateful for the rest.
The tenge was born in 1993, after Kazakhstan’s independence from the Soviet Union.
It had a bumpy ride with initial inflation, matching concerns about the viability of an independent Kazakhstan. The exchange rate against the dollar jumped from an initial 4.75 to 35 within two months.
A dollar peg provided some stability — even if it was shaky — for the tenge during the second half of the 1990s but the Russian and Asian crises forced a new market- driven devaluation. Between April and September 1999, the tenge lost one third of its value against the greenback.
A corner, though, was turned at the start of the 21st century and with Kazakhstan maturing as a country so did its currency. Fiscal responsibility helped keep down inflation in the early 2000s, oil prices slowly rose, giving Kazakhstan’s fledging energy sector a boost.
Then came two devaluations of 20%. The first in Feb. 2009 and the second five years later.
With the US Federal Reserve easing its policy of cheap money and preparing to raise interest rates, pressure on emerging currencies, including the tenge, is likely to increase.
Aged 21, the tenge has already had an eventful existence.
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(News report from Issue No. 209, published on Nov.19 2014)
NOV. 7 2014 (The Conway Bulletin) – Kairat Kelimbetov, head of the Kazakh Central Bank, said the tenge currency would not be devalued for at least three years. The comments, made at a conference in Almaty, were the strongest indicator yet that, despite a falling rouble, the tenge would not devalue for the second time this year.
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(News report from Issue No. 208, published on Nov.12 2014)
NOV. 10 2014 (The Conway Bulletin) – The sharp fall in the price of oil has acted as a wake-up call for Kazakhstan, economy minister Kairat Kelimbetov said in an interview with the FT.
Virtually admitting that Kazakhstan had been caught off guard by the decline by roughly a third in the price of oil since June, Mr Kelimbetovsaid that the government was the economy and to make it planning measures to shore up more attractive to investors.
“Next month the government will be ready to announce some counter cyclical fiscal policy, with big plans in infrastructure,” he said in the interview in Almaty.
Economists have warned that a devaluing rouble and falling oil prices will combined to knock Kazakhstan’s growth rate.
And the falling economy is also knocking investor confidence. Energy analyst Sergei Smirnov said that with Brent oil prices falling to a four year low of $82/barrel it makes projects such as Kashagan unprofitable.
“Offshore oil production is always much more expensive than onshore production,” he said according to media.
Kazakh officials who have staked their credibility and the country’s economic prosperity on Kasahgan but the project is already behind schedule and running over budget.
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(News report from Issue No. 208, published on Nov.12 2014)
OCT. 30 2014 (The Conway Bulletin) – Uzbekistan’s sum currency lost 20% of its value over a few days because of the depreciation of the Rouble, Russian media reported quoting a Central Bank official. Economists have warned of a ripple effect across Central Asia from the worsening Russian economy.
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(News report from Issue No. 207, published on Nov. 5 2014)
OCT. 17 2014 (The Conway Bulletin) – With the rouble under increased pressure it has become likely, analysts have said, that the Kazakh government will devalue its currency for the second time this year.
Halyk Bank placed the tenge on a negative watch. The report, no longer available on the website of Halyk’s Financial Department, said the tenge would be around 210/$1 by the end of the year compared to 183/$1 currently. That’s a drop of around 10%.
“In the last three days conditions in Tenge-denominated money markets deteriorated sharply,” Halyk Bank wrote.
“Such changes usually happen before devaluations: demonetization, declining demand for Tenge- denominated assets, the rising cost of holding Tenge mirrored by the rising costs of borrowing, all illustrating a loss of confidence and the deepening of the currency crisis.”
Sabit Khakimzhanov, head of research at Halyk Bank and author of the report, attributed the weakening of the tenge to rising interest rates, rouble trouble, and oil prices below $95 per barrel.
The note will have irritated the Kazakh Central Bank which has been denying that it is planning a second devaluation of its currency. Khakimzhanov said that, unusually, an unnamed party had been buying $200m worth of tenge every day. This, analysts suspected, was the Central Bank trying to shore up its currency.
And, rather mysteriously, a few days after it was put up on its website, the currency note disappeared. Analysts at Halyk Bank told the Conway Bulletin that it was a management decision to take down its report.
Earlier this year, the government devalued the tenge overnight by 20%.
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(News report from Issue No. 205, published on Oct. 22 2014)
OCT. 9 2014 (The Conway Bulletin) – Kazakh economy minister Yerbolat Dossayev refuted speculation the Central Bank was planning to devalue the tenge again this year, media reported. Kazakhstan’s economy has stalled since sanctions started to bite Russia. Kazakhstan has already devalued its currency by 20%.
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(News report from Issue No. 204, published on Oct. 15 2014)
