Tag Archives: currency

Georgia’s Central Bank props up lari

DEC. 20 2016 (The Conway Bulletin) — Georgia’s Central Bank sold $40m to try to stem a drop in the value of the lari, its first currency intervention since Oct. 12. In the past three months, the lari has lost around 19% of its value against the US dollar, worsening an already difficult economic outlook. In 2016, Georgia has sold $280m. The Central Bank blamed a strengthening US dollar for the lari slide.

ENDS

(News report from Issue No. 310, published on Dec. 23 2016)

Georgia Global Utilities issues 30m lari bond

TBILISI, DEC. 12 2016 (The Conway Bulletin) — Georgia Global Utilities (GGU), a subsidiary of London-listed BGEO Group, issued a 30m lari ($12m) bond, giving investors the chance to take a punt on the lari.

The bond, destined to GGU’s subsidiary Georgian Water and Power, offers a 3.5% premium over the Central Bank’s lari refinancing rate and will mature in five years.

The lari has slid by 15% in the past three months against the US dollar and is now trading at 2.66/$1. This prompted the Central Bank to stop easing its monetary policy and to keep interest rates stable at 6.5%.

Despite the fall in the value of the lari, BGEO was bullish about the issue. “This is in line with GGU’s funding strategy to continue to raise new funding in local currency, with longer-term maturity,” Irakli Gilauri, BGEO’s CEO, said in a statement.

Georgian Water and Power, which supplies water to Tbilisi, Mtskheta and Rustavi, was privatised in 2008. The sale was criticised because of a perceived lack of transparency over GGU’s British Virgin Islands registration.

ENDS

(News report from Issue No. 309, published on Dec. 16 2016)

Azerbaijan to switch to fully floating currency in 2017

DEC. 12 2016 (The Conway Bulletin) — Azerbaijan plans to switch to a fully floating currency next year, the Central Bank said, signalling more turbulence for the manat.

The Central Bank has relaxed the manat’s peg to the US dollar twice in the past couple of years, allowing it, in effect to lose half its value. It has also been managing a fall of around 19.5% since June to trade at 1.79/$.

Media quoted the head of the Central Bank, Elman Rustamov, as saying that macro-stability meant that the time was now right to move to a fully floating currency.

Many Azerbaijanis would disagree, though.

As The Conway Bulletin has reported previously, many ordinary Azerbaijanis have lost confidence in the manat and have been trying to withdraw their savings and convert them into US dollars. Many banks in Baku have run out of US dollars.

ENDS

(News report from Issue No. 309, published on Dec. 16 2016)

Uzbekistan’s acting-president signals changes to currency controls

NOV. 29 2016 (The Conway Bulletin) — Uzbekistan’s acting-president Shavkat Mirziyoyev published a draft decree on the presidential website laying out what appeared to be a manifesto to liberalise some of the tightest currency controls in the world.

In the draft decree, Mr Mirziyoyev wrote that restrictions would be lifted on foreign companies working in Uzbekistan and on Uzbeks taking money out of the country.

The document said that the main aims of the reforms were to “stimulate growth of the country’s export potential, improve the competitive- ness of domestic producers in foreign and domestic markets” and to “create equal conditions for all participants of foreign economic activity during their foreign exchange operations and the prohibition of the practice of privileges and preferences to individual companies or sectors”.

Specifically, the document said Uzbeks would be allowed to take up to $10,000 out of the country. Currently, Uzbeks are banned from taking cash out of the country. Foreign companies working in Uzbekistan have also complained about restrictions on repatriating profits. Under the draft regulations this should be easier.

Uzbekistan also operates a dual exchange rate with the official and the Black Market rate varying widely.

The draft legislation on the presidential website didn’t specifically tackle the issue of the dual exchange rates but loosening currency controls should bring them together.

ENDS

(News report from Issue No. 307, published on Dec. 2 2016)

Stock market: Georgian lari and Azerbaijani manat

DEC. 2 2016 (The Conway Bulletin) — Currencies in the South Caucasus have declined sharply over the past few weeks after a slew of poor economic data and a strengthening US dollar.

The Georgian lari hit an all-time low on Tuesday, when it traded at 2.53/$1. A year ago it traded at 1.84/$1. In the past two months, it has fallen by 8%.

The government in Tbilisi said the slide was due to a negative trade balance and the strengthening US dollar. In what could have been a spiral effect, demand for US dollars within Georgia soared, as people feared a sharper depreciation of the national currency.

Macroeconomic statistics have shown that Georgia’s GDP growth has slowed in the past months, disappointing observers.

The Azerbaijani manat, the world’s worst-performing currency in 2015, has also depreciated against the US dollar, down 6.5% in the last 60 days. It traded at 1.73 on Thursday, down almost 40% compared to last year.

Azerbaijan’s banks also stopped selling US dollars due to shortages.

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(News report from Issue No. 307, published on Dec. 2 2016)

Kazakhs cut out imported luxury goods to beat tough economic times

ALMATY/TARAZ, Kazakhstan, NOV. 21 2016 (The Conway Bulletin) — A stubborn, painful economic downturn has wiped 4% off the average Kazakhs’ purchasing power, the ranking.kz website reported, forcing people to cut out luxury items — especially those imported from abroad.

Aiganym Dosmail, who works in an advertising agency in Almaty, said that she had cut out on buying luxury items that had been imported and ballooned in price since the devaluation of the tenge last year.

“I optimise my spending. Previously, I bought a lot of unnecessary stuff and now I buy only those goods that last long and are good quality. It is of course sad that previously marsh- mallows cost 300 tenge and now they cost 800 tenge,” she told the Bulletin.

The tenge lost half its value last year after the government reluctantly cut its peg to the US dollar. Low oil prices and a recession in Russia had pressured the Kazakh economy, and others across the region, into currency devaluations and budget cuts.

Worst hit are importers of luxury goods. Most Kazakhs now can’t afford to buy the foreign goods that they could afford even a year earlier.

Unlike Ms Dosmail, Aigerim Zhanuzak’s hairdressing salon in Taraz in the south of the country has been far less affected. She said that most of her clients are self-styled middle class Kazakhs and that she hasn’t had to put up her costs because she doesn’t have may import costs.

“My salon is targeting middle income and higher class people which means the crisis doesn’t impact people when it comes to personal comfort. People always want to eat and lto ook good,” she said. “If we talk about the financial crisis in our town then it has hit the lower-income population. Goods have become more expensive, public transport as well, but salaries have not increased, unfortunately.”

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(News report from Issue No. 306, published on Nov. 25 2016)

Currency booths start selling US dollars again in Azerbaijan

BAKU, SEPT. 15 2016 (The Conway Bulletin) – Currency exchanges in Azerbaijan have started selling US dollars once again after the Central Bank sold $300m and increased interest rates to their highest level since 2008 to support the manat.

The near-emergency measures were taken last week after currency booths stopped selling US dollars because of a lack of confidence in the Azerbaijani manat which had lost 11% of its value since the start of June. Confidence in the manat was destroyed last year when two devaluations wiped 50% off the value of the currency.

Azerbaijan’s economy is reliant on oil for its revenues and the government has been slashing projects to account for the drop in revenues. Even so, economists forecast a GDP drop this year.

“There is a crisis in every single sector of the economy, starting from trade, ending in construction, agriculture, and services,” Zohrab Ismayilov, a Tbilisi-based Azerbaijani economist told The Conway Bulletin.

And this is being felt at street level where jobs have been lost, savings cut in half and prospects diminished. Earlier this year a series of protests across the country, unusual in Azerbaijan where the security forces normally maintain a tight grip, shook the government.

Rashad, 31, the owner of a small catering business in Baku, told the Conway Bulletin that like most Azerbaijanis he has had to resort to using the Black Market to exchange manat into US dollars.

“I had to have dollars and at the weekend I could not find an open bank which has a running exchange service. So, I found a friend who knows an illegal exchange place and did my exchange there,” he said.

And the economy is tightening.

“Because of the economic situation, companies are cutting their costs and the market is becoming too narrow,” he said.

Mr Ismayilov, the economist, said that the Azerbaijani government could only prop up the currency for so long.

“Everybody now expects the third devaluation,” he said.

“It is very likely to happen by the end of this year. And it will be a big blow to the economy.”

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(News report from Issue No. 296, published on Sept. 16 2016)

Azerbaijan raises interest rates to 8-year high

SEPT. 9 2016 (The Conway Bulletin) — Azerbaijan’s Central Bank raised its key interest rate to 15% from 9.5%, its highest level since 2008, to try to boost confidence in the ailing currency.

The manat has been falling in value for weeks, hitting an all-time low of 1.67/$1 on Friday, setting off fears of another currency crisis. Last year, the Central Bank devalued its currency twice, undermining confidence and wiping out people’s manat-based savings. A series of protests across the country against the worsening economic conditions, almost unprecedented in Azerbaijan, unnerved the Azerbaijani leadership.

The currency had been gaining in value this year until the end of May when it began to slip again. The manat has now lost 11% of its value since May 30.

The day before, the Azerbaijani Central Bank had sold $100m to try to prop up its currency.

Last week, Bloomberg News reported that local banks and exchange bureaus had suspended sales of foreign currencies due to the high demand.

Ratings agency Moody’s said the government should change regulations on capital controls brought in earlier this year.

“The restrictions on foreign-currency sales have led to the emergence of a parallel exchange market, which in our view speaks to the challenges the central bank faces to stem dollar demand and elevates risks of an accelerated depreciation in the official exchange rate,” Moody’s analysts said in a report.

Low oil prices have hit Azerbaijan’s economy hard over the past two years. Azerbaijan ‘s economy is particularly dependent on oil revenues as it generates around 3/4 of its income.

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(News report from Issue No. 295, published on Sept. 9 2016)

Azerbaijan halts currency trades

SEPT. 2 2016 (The Conway Bulletin) — Banks in Azerbaijan’s capital have stopped selling foreign currency as demand soared after the Azerbaijani manat started to depreciate, triggering memories of the currency’s double devaluation last year.

The news will be disappointing to Central Banks across the Central Asia and South Caucasus region who had hoped to have moved away from the currency crises of 2014 and 2015.

According to sources in Baku, the manat traded at 1.68/$1, 5% lower than last month. They said that many Azerbaijanis now fear that another crisis is around the corner and have tried to hoard foreign currency. Bloomberg reported that 15 banks in Baku and the city’s international airport had stopped selling US dollars, a sign that demand had surpassed availability.

Azerbaijan’s economy is particularly vulnerable to the vagaries of oil prices, which have collapsed since 2014, and it is set to shrink this year for the first time since the mid-1990s.

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(News report from Issue No. 294, published on Sept. 2 2016)

Azerbaijan’s CBank raises interest rates to 9.5%

AUG. 8 2016 (The Conway Bulletin) — Azerbaijan’s Central Bank raised its key interest rate to 9.5% from 7%, its highest level since 2008, in an effort to bolster its currency.

Azerbaijan’s economy is based on oil, meaning that a fall in prices has hit its economy hard. Analysts have predicted a recession this year, the first since the 1990s.

The manat currency was devalued twice last year. It had been strengthening throughout 2016 but has lost around 10% of its value since June and is, according to Bloomberg, now one of the five worst performing currencies. The Central Bank increased its key interest rate to 5% from 3% in February.

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(News report from Issue No. 292, published on Aug. 12 2016)