Tag Archives: currency

Editorial: Kazakh and Kyrgyz de-dollarisation

APRIL 8 2016 (The Conway Bulletin) – Central Banks in Central Asia are boasting about de-dollarisation these days, painting a rosy picture of their success in combating their economies’ dependence on the greenback.

A closer look at the stats, however, reveals that a combination of heavy interventions in the currency markets and interest rate tweaking were the main drivers of healthier Kazakh tenge and Kyrgyz som.

But now Central Banks have to grapple with inflation, which continues to grow, and demand for credit, which continues to shrink.

Central Banks propped up local currencies, against a US dollar that has now slowed its rise against Emerging Markets currencies and commodities.

Restrictions on exchange points, bans on pricing goods in dollars and public calls for confidence have all contributed to curbing the use of dollars.

But Central Banks might have run out of options now and they need to steer away from “crisis mode” if they want to really restore confidence in their still ailing currencies.

ENDS

(Editorial from Issue No. 275, published on April 8 2016)

Kyrgyzstan bans price labels in foreign currencies

APRIL 2 2016, BISHKEK (The Conway Bulletin) — Kyrgyzstan banned labelling goods for sale in anything other than Kyrgyz som, a move it said would help strengthen the national currency and reduce its economy’s reliance on US dollars.

Since a crash in the value of local currencies in Central Asia and the South Caucasus last year, de-dollarisation has become a buzzword among Central Banks.

In Kyrgyzstan, the authorities have concentrated on persuading more people to use som over US dollars to buy goods. And this now includes banning shopkeepers from pricing goods in US dollars.

The punishment for pricing goods in US dollars still hasn’t been announced but it will be a challenge to the authorities to impose the ban successfully.

Zhumakadyr Akeneyev, a former head of oil traders association and now an economic commentator, said de-dollarisation was a positive step.

“Finally, for the first time since independence, we have turned our face to the national currency,” he said.

Other Kyrgyz said that while they broadly welcomed the move, they were also sceptical that it would work.

“I like this idea. Many people, who borrowed money from the banks in foreign currencies, suffered from devaluation of som,” said 25-year-old Saltanat. “However, I think the government should leave some space for use of foreign currencies too.”

ENDS

(News report from Issue No. 275, published on April 8 2016)

Kazakh Central Bank says that confidence in tenge has returned

APRIL 5 2016, ALMATY (The Conway Bulletin) — Kazakhs have increased the amount of tenge they are keeping in bank accounts, suggesting that they now trust the currency once again despite it halving in value over the past seven months, Kazakhstan’s Central Bank said.

In February, Central Bank data showed that the amount of tenge saved in banks rose to 1.53 trillion tenge ($4.5b), up 5% from January. Significantly, too, the proportion of tenge as savings grew to 22% of the total, up from 20% in January.

Analysts said that two factors had contributed to this renewed confidence in the tenge. The first was that this year, the tenge has actually strengthened against the US dollar to around 340/$1 compared to an all- time low in mid-January of 390/$1.

In March, Kazakhstan’s Central Bank heavily intervened in the currency market, buying $1.2b on the Kazakh Stock Exchange, around 2.6 times more than it bought in February.

This, together with high liquidity ensured by capital held at the Single Pension Fund, helped to improve the tenge’s position, analysts said.

“The Central Bank now faces the problem of too much liquidity and too high interest rates,” Askar Akhmedov, senior analyst at Halyk Finance, part of one of the largest Kazakh banks, said in a report.

Secondly, analysts said the Central Bank’s policy of increasing interest rates on tenge savings in banks to 14% from 10%, in addition to dropping the interest paid on foreign currency savings to 2% from 3% was working.

On the streets of Almaty this more positive view of the tenge was, generally, reflected.

A pensioner said: “It is our national currency, and I trust it but the 50% drop in its value was unpleasant, especially for pensioners.”

Most people that the Bulletin’s correspondent in Almaty spoke to agreed, and it will be a relief to President Nursultan Nazarbayev and the Kazakh government that confidence in the tenge is returning after a torrid 2015.

There were some who took a more cautious approach, though.

“Nowadays the position of the tenge is unsteady and it may weaken again. If I had to choose between tenge and dollar to put money in deposit, I’d probably choose dollar,” said Aigerim, a music teacher.

ENDS

(News report from Issue No. 275, published on April 8 2016)

Kazakhstan- based Tethys losses rise

MARCH 29 2016 (The Conway Bulletin) – Guernsey-based Tethys Petroleum said its losses more than quadrupled in 2015 compared to the previous year, mostly due to the depreciation of some of its Kazakh assets. Tethys lost $74.6m in 2015. According to the company’s yearly report, the tenge depreciation also dented revenues. The tenge lost around half its value against the US dollar in 2015.

ENDS

(News report from Issue No. 274, published on April 1 2016)

Dollarisation grows in Georgia

MARCH 25 2016 (The Conway Bulletin) – The Georgian Central Bank said the dollarisation of Georgia’s economy continued to rise in February, as US dollar deposits grew to 68.4% of the total, the highest level since October 2010. A high dollarisation of deposits suggests that bank customers’ trust in the local currency in waning.

ENDS

(News report from Issue No. 274, published on April 1 2016)

Kyrgyz CBank injects more som

MARCH 30 2016 (The Conway Bulletin) – The Kyrgyz Central Bank continues to buy US dollars in the currency market because demand for foreign currency is shrinking and, the Bank’s chief Tolkunbek Abdygulov told a press conference, people and businesses need improved som liquidity. The Central Bank bought around $62m in March.

ENDS

(News report from Issue No. 274, published on April 1 2016)

Georgia picks CBanker

MARCH 16 2016 (The Conway Bulletin) – Georgia’s Central Bank picked Koba Gvenetadze, a former IMF banker, to be its chief, replacing Giorgi Kadagidze whose term finished in February. The following day, President Giorgi Margvelashvili approved Mr Gvenetadze’s 7-year term at the Bank. Georgia’s economy has been under increased pressure from the falling value of the lari and rising inflation linked to a fall in oil prices and recession in Russia.

ENDS

(News report from Issue No. 272, published on March 18 2016)

EBRD to help Armenia develop currency markets

MARCH 15 2016 (The Conway Bulletin) – The European Bank for Reconstruction and Development (EBRD), one of the biggest investors in the former Soviet region, signed a deal with Armenia’s Central Bank to help it develop dram-listed capital markets, to improve Armenia’s image as a reliable financial market.

The agreement is part of EBRD’s Local Currency Programme (LCP), which is also aimed at Georgia, Kyrgyzstan and Tajikistan.

“The EBRD provides local currency loans through procuring local currency funding or hedging, by entering into currency swaps with third party providers, such as the Currency Exchange Fund,” the EBRD said in a statement.

It’s been one of the EBRD’s stated aims to develop markets and financial tools which support local tools and reduce the dollarisation of economies.

“Expanding the availability of local currency financing is crucial for the growth of local businesses by providing them with fund at affordable rates and manageable risk,” Andre Kuusvek, EBRD director at the LCP said in a statement.

Strengthening and protecting local currencies has become especially important after the drop in oil prices globally exposed their vulnerabilities.

ENDS

(News report from Issue No. 272, published on March 18 2016)

Business comment:

MARCH 11 2016 (The Conway Bulletin) – Kazakhstan is AvtoVAZ’s largest export market but a duty introduced at the start of the year by the Kazakh government to support its car making industry, has, apparently, destroyed it.

The number of AvtoVAZ cars delivered to the country jumped in 2015 due to the tenge-rouble currency imbalance for the first part of the year.

From the end of 2014 the rouble started collapsing, but the Kazakh Central Bank stubbornly kept the tenge at 185/$1.

This made imports very cheap, undermining Kazakhstan’s own carmaking industry but boosting AvtoVAZ.

In the first half of 2015, car sales were down by one-third. For the year, sales were down 40% to 97,446 units, the lowest level since 2012.

Even President Nursultan Nazarbayev weighed in and said that it was wrong for Kazakhs to buy cheaper products abroad and push the domestic industry out of the competition.

The Kazakh government also looked into subsidising the local automotive sector and impose import duties — an issue that must surely have raised concerns for both the World Trade Organisation and the Eurasian Economic Union.

The new $2,000 car import tax has also had an almost immediate effect. It has made imports unsustainable. It has simply priced them out of the market, denting consumer choice and, also, Kazakh- Russian relations.

Kazakhstan and Russia are supposed to be allies. The Eurasian Economic Union, a Kremlin project, was supposed to protect the area from interventionist duties. Where was it when Kazakhstan said it was going to impose its $2,000 import levy on car imports.

ENDS

(News report from Issue No. 271, published on March 11 2016)

Kazakh CBank introduces new rules

FEB. 29 2016 (The Conway Bulletin) – Kazakhstan’s Central Bank imposed new rules for exchanging tenge into US dollars in an effort to bolster its tenge currency, which has lost around half its value in the past 12 months. From now, Kazakhs will have to present photo ID if they want to exchange more than 1m tenge ($2,860) into any foreign currency. This is half the previous level.

ENDS

(News report from Issue No. 270, published on March 4 2016)