JULY 27 2016 (The Conway Bulletin) — Georgia’s Central Bank said on Wednesday it cut its key interest rate by a quarter of a percentage point to 6.75%. The decision is in line with the Bank’s policy of containing inflation while reducing the rate to within a 5% – 6% corridor in the short term. Since April, the Bank has cut interest rates three times from the previous level of 8%.
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(News report from Issue No. 291, published on Aug. 1 2016)
ALMATY, JULY 28 2016 (The Conway Bulletin) — Kazakhstan’s Central Bank said it will not intervene to prop up the tenge currency after it lost 3.5% of its value over the past week, hitting a five-month low of 354/$1 on Thursday.
This is the sharpest drop since February, the tail-end of a two year fall for the tenge during which it has lost half its value against the US dollar.
Even so, Adil Mukhamedzhanov, deputy director for monetary operations at the Central Bank, told Kazakh media that interventions would be light.
“Several factors impacted the exchange rate, chiefly low oil prices and worsening exchange rates of our trading partners,” he was quoted as saying.
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Copyright ©The Conway Bulletin — all rights reserved
(News report from Issue No. 291, published on Aug. 1 2016)
JULY 26 1 2016 (The Conway Bulletin) — Negotiations for a $500m IMF loan are continuing, Jamoliddin Nuraliyev, deputy chief of Tajikistan’s Central Bank told local media. The IMF has scheduled a visit to the country in August to lay out details for the loan. Mr Nuraliyev said that the country needs support to see it through a “difficult economic period.”
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(News report from Issue No. 291, published on Aug. 1 2016)
AUG 1 2016 (The Conway Bulletin) — It has taken Kazakhstan a long time, but it could finally have reached its goal of having a free-floating currency.
The nightmare of last August when the tenge depreciated sharply against the US dollar after the Central Bank removed its currency peg, seems over.
That was the uncertainty of having a Central Bank chief, Kairat Kelimbetov, who didn’t show resolve and authority, and the uncertainty of living through a period of falling oil prices.
Gradually, since November 2015, when Daniyar Akishev was made the Central Bank chief, Kazakhstan has switched to a more hands-off policy, allowing the tenge to slide as the market demanded.
This new policy created another kind of uncertainty. The tenge will float freely, swept by oil prices and the performance of other currencies in the region.
This could mean that, with oil prices sliding back towards $40/barrel and the US Federal Reserve planning to raise interest rates, Kazakhstan could soon be facing an even weaker tenge.
The tenge depreciated by 5% this month, to 354/$1 and the outlook for the next few months is not promising. Analysts have said that this could be the beginning of a gradual slide that only much higher oil prices could reverse.
In an oil price scenario that has come to be known as ‘lower for longer’, a three-figure oil price, as it was in 2014, will remain unlikely for a while.
In addition, the Russian rouble seems to be limping behind the US dollar, which is causing a negative ripple effect on currencies across Central Asia and the South Caucasus. Kazakhstan’s membership of the Eurasian Economic Union bloc is, in this case, a determining factor for the tenge.
Domestically, too, with apparent terror attacks in western Kazakhstan and unprecedented violence on the streets of Almaty, the situation is not looking good. Insecurity has never been a foundation for currency stability.
And then, of course, there is the economic headache of negative growth, and falling oil production which will continue to undermine the tenge.
The tenge is unlikely to thrive in this contingency.
The ‘$1 stores’ that mushroomed across Kazakhstan towards the end of last year, selling items at the fixed price of 300 tenge, might now be forced to adjust their price, possibly on a daily basis, to reflect a worsening exchange rate.
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(News report from Issue No. 291, published on Aug. 1 2016)
JULY 19 2016 (The Conway Bulletin) — Armenia’s Statistics Committee said that trade turnover increased by 2.7% in H1 2016, compared to the same period last year, pushed up by a boost in exports. Exports grew by 16.7% to $815m, while imports decreased by 3.7% to $1.46b. A weak dram has made Armenian goods cheaper for exports.
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(News report from Issue No. 290, published on July 22 2016)
JULY 19 2016 (The Conway Bulletin) — Tajikistan could soon join the Kremlin-led Eurasian Economic Union, Abdufattoh Goib, head of the Border Service, told local media. Mr Goib said the government had instructed officials to join EEU working groups to study access requirements. Earlier this month, Leonid Slutsky, chairman of CIS affairs at the Russian Duma, said that Tajikistan might join next year.
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(News report from Issue No. 290, published on July 22 2016)
JULY 19 2016 (The Conway Bulletin) — Georgia’s Statistics Committee said that trade turnover had shrunk by 11% in H1 2016, compared to the same period last year, dragged down by dwindling imports. Overall, the fall in both exports and imports resulted in a smaller trade deficit of $2.3b. Turkey, Russia and China are Georgia’s main trading partners.
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(News report from Issue No. 290, published on July 22 2016)
JULY 22 2016 (The Conway Bulletin) — >>Malaise, downturn recession. What exactly going on in Central Asia and the South Caucasus?
>>All countries in the region are either growing slower than last year or, in some cases, their economies are even shrinking. The crisis is regional, although each country has shown its own specific problems.
>>This is the region-wide problem. I can see but what caused it?
>>The US dollar strengthened so much in 2014 that it triggered a sharp drop in oil and commodity prices. This pulled dollars away from Emerging Markets, like our own patch. As commodity prices sank, Russia fell into a crisis that quickly turned into a recession. The depreciation of the rouble cut the value of salaries earned by migrant workers, triggering a slowdown in remittances to Central Asia and the South Caucasus.
>>Okay, but oil prices picked up again since the 13- year low point in January. Isn’t that good for energy exporters in Central Asia and the South Caucasus?
>>Higher oil prices have helped state-owned oil companies to relax their emergency mode, but they’re still too low to justify the region’s most expensive projects. Think of the Kashagan oil project in Kazakhstan’s sector of the Caspian Sea, or the upgrade of Azeri Chirag-Guneshli oil project in Azerbaijan. Plus there are negative signs for transparency over the re-organisation of government companies and structures in the energy sector in Kazakhstan and Turkmenistan.
>>And what about the other commodities, such as gold and aluminium?
>>Gold is a big component of Kyrgyzstan’s GDP as it depends on the performance of the Kumtor gold mine in the east of the country. This year, operational problems and corporate battles have slowed production, which has significantly hit Kyrgyzstan’s growth figures. It now could slip into a recession. Tajikistan, on the other hand posted a promising 6.6% GDP growth in the first half of 2016 and state-owned smelter TALCO increased aluminium production. But these numbers should be read with caution. TALCO also said that it is currently operating at a loss, as its production costs are 25% higher than market prices.
>>Right, so is it all bad?
>>Not necessarily. Dollarisation, as Georgia’s Central Banker said this week, is still a problem across the region and the currencies continue to be weak. But despite some devaluations and depreciations, most of them have kept steady in 2016, which is a sign that governments want to keep their economies stable and will spend their reserves to prop them up.
>>And for companies looking to do business in the region, how bad is it?
>>If in 2015 we saw scores of international companies running away from projects in Central Asia and the South Caucasus, this year we’ve seen promising developments, such as the final investment decision for the expansion of the Tengiz oil- field in Kazakhstan and the signing of the contract for the construction of the Rogun dam in Tajikistan, both multibillion-dollar commitments. French hypermarket Auchan has also opened up its long-awaited store in Dushanbe. Perhaps confidence is returning or at least a sense of “let’s just get on with it”.
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(News report from Issue No. 290, published on July 22 2016)
TBILISI, JULY 21 2016 (The Conway Bulletin) — Koba Gvenetadze, the new chief of the Georgian Central Bank, hinted that he wants the lari currency to slide further to keep pace with Georgia’s neighbours who have all seen their currencies fall heavily over the past two years.
Mr Gvenetadze said that the lari had strengthened too much against the US dollar earlier this year and as soon as the Central Bank relaxed its interventions in the currency market in mid-June, it slid to 2.34/$1, down from a high of 2.13/$1.
“Part of the population thinks that a steady foreign exchange is a synonym of stability, but that’s wrong,” Mr Gvenetadze told the newspaper Rezonansi in an interview designed to lay out his monetary policy. Mr Gvenetadze took over as the Central Bank chief in March.
He said that if people continue to use US dollar-equivalent measures to calculate their wealth or the value of their property, the lari will continue to suffer.
“Sometimes unpopular decisions can be made, but we need to see what happens in the future,” Mr Gvenetadze said.
After losing 27% of its value in 2015, the lari had strengthened significantly against the dollar, gaining 13% by June. Since then, though, it has fallen back to January levels.
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(News report from Issue No. 290, published on July 22 2016)
JULY 19 2016 (The Conway Bulletin) — Armenia plans to ban the import of 50 Turkish products into Armenia, officially because they fail to meet new safety standards, a move that could reduce its overall imports from Turkey by up to 20%, Vazgen Safaryan, head of the lobby group Union of Domestic Producers, told local media.
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(News report from Issue No. 290, published on July 22 2016)
