Tag Archives: economy

S+p downgrades Azerbaijan’s debt status

JAN. 29 2016 (The Conway Bulletin) – Ratings agency Standard & Poor’s downgraded Azerbaijan’s debt status to junk and said that its economy would contract for the first time in a decade. The downgrade from BBB- to BB+ comes off the back of a 35% collapse in the value of the Azerbaijani manat, growing internal dissatisfaction and concern over disappearing jobs. Azerbaijan is reliant on oil exports for revenues.

ENDS

(News report from Issue No. 266, published on Feb. 5 2016)

Business comment: Central Bank intrigue in Kazakhstan

FEB. 5 2016 (The Conway Bulletin) — In Kazakhstan, the Central Bank resumed its work as the country’s financial regulator after a three-month hiatus, increasing interest rates by 1 percentage point to 17%.

Daniyar Akishev, the Central Banker, is at the helm again, it seems. He even ordered a handful of interventions in the currency market in January, something he had ruled out since his appointment last November.

Now, Kazakhstan watchers expect monetary policy to become more stable and predictable in the coming months. The next policy meeting will be held in six weeks, one week before a parliamentary election on March 20.

Still, many don’t see Mr Akishev’s position as an independent one. He is a seasoned Central Bank employee, but it is clear that he is not as free as many Western Central Bankers are.

A recent symbolic move could corroborate this view. This week, Kazakhstan’s President Nursultan Nazarbayev signed a decree that makes the Central Banker’s signature on the back of banknotes redundant.

Only eagles, monuments and the President’s handprint will continue to feature in Kazakhstan’s colourful currency.

The Central Banker’s signature is a convention that most countries in the world adopt.

Kazakhstan will now join a handful of countries that don’t feature their Central Banker’s signature on banknotes. This group includes China, Japan and Uzbekistan.

This might be, essentially, a final step by the Kazakh government to strip the Central Bank of the independence it gained under former governor Grigory Marchenko who left in 2013.

ENDS

(News report from Issue No. 266, published on Feb. 5 2016)

Georgia’s GDP slows

JAN. 29 2016 (The Conway Bulletin) – Georgia’s GDP grew by 2.8% in 2015, down from 4.6% in 2014, the national statistics office said. This was around half predictions at the beginning of the year and was the lowest annual growth rate since 2009, when the Global Financial Crisis dented growth around the world. Georgia’s government has said that it expects growth of around 3% in 2016.

ENDS

(News report from Issue No. 266, published on Feb. 5 2016)

IMF flies to Azerbaijan for talks on $4b loan

JAN. 27 2016, BAKU (The Conway Bulletin) — An IMF delegation flew to Baku for meetings with Azerbaijan’s government over a potential loan to buffer it against a financial storm that now threatens to seriously damage its economy.

The FT newspaper reported that the the loan could hit $4b, although an IMF statement later dodged giving specific numbers.

“An IMF team will be in Baku during Jan. 28 – Feb. 4 for a fact- finding staff visit at the authorities’ request. The team will discuss areas for technical assistance and assess possible financing needs,” it said in a statement.

Azerbaijan’s finance minister, Samir Sharifov, though, played down reports of a loan.

He instead said that Azerbaijan was going to raise $2b by selling debt for the Southern Caucasus Gas Corridor Company, which manages various pipelines, and pipeline projects, running from the Caspian Sea to Europe.

“There is no urgent need for a loan, but we can raise loans to support the economy amid low oil prices,” Mr Sharifov told journalists in Baku of talks with the IMF.

If Azerbaijan did take an IMF loan it would be the first emergency loan given to a sovereign state during this current financial downturn. Taking an IMF loan would also dent Azerbaijan’s pride. Fuelled by high oil prices its economy has boomed over the past 15 years. The government has invested heavily in promoting its reputation as a bridge between the East and West, building grandiose towers and sponsoring major sports events.

But the government has failed to shift Azerbaijan from a petro-econ- omy to a more dynamic economy with several income streams. Instead, Azerbaijan still receives around 95% of its export revenue from oil sales.

And with oil prices at around 12- year-lows this has begun to hurt.

The government has slashed spending, inflation is soaring and jobs are melting away. The manat currency has dropped a third in value in the past month and frustrated ordinary people are beginning to speak out and protest against the government.

A Conway Bulletin correspondent in Baku said people in the streets were increasingly referring to the current economic downturn as a “crisis”.

ENDS

(News report from Issue No. 265, published on Jan. 29 2016)

Azerbaijan Central Bank closes banks which fail capital stress test

JAN. 27 2016 (The Conway Bulletin) — Azerbaijan’s Central Bank stripped six banks of their licences because they failed to meet newly imposed minimum capital requirements, a strong signal that the authorities want to weed out weaker banks to try to fend off a deepening financial crisis.

The six banks — Ganja Bank, Bank of Azerbaijan, United Credit Bank, NBC Bank, Caucasian Development Bank and Atrabank — all lost their licences in the past 10 days. This leaves just over 30 banks operating in Azerbaijan.

“Banks that don’t meet requirements and have major shortcomings can’t operate in Azerbaijan,” President Ilham Aliyev said in a televised statement, hinting at more closures.

In mid-2012, Azerbaijan’s Central Bank increased by five times the minimum capital requirements for commercial banks from 10m manat to 50m manat (then around $64m, now $31.3m). The deadline for all banks in the country to comply with the new requirements was first set for 2013 and then delayed to end-2015.

For banks, one way to avoid closure and improve financial health is to unite. AGBank and DemirBank signed a protocol to merge last week and Pasha Bank, Kapital Bank and Atabank are in talks to create a single lender, according to Bloomberg.

Last week, ratings agency Moody’s downgraded several of the biggest banks in Azerbaijan, a direct consequence of the negative impact of the manat depreciation. Three of Azerbaijan’s top-10 banks, Xalq Bank, Bank of Baku and Unibank, were among the lenders on Moody’s radar.

With the Azerbaijani manat falling by 35% since Dec. 21, this is a particularly tough time for Azerbaijan’s banking sector and for ordinary people. The IMF has also flown into Baku to potentially offer a loan.

ENDS

(News report from Issue No. 265, published on Jan. 29 2016)

Georgian lari hits all-time low

JAN. 22 2016 (The Conway Bulletin) – The Georgian currency, the lari, hit an all-time low of 2.47/$1, despite various interventions by the Central Bank to prop it up. Its previous low had been set in 1999, providing context for just how much value currencies in the South Caucasus and Central Asia have lost. The lari is down around 25% from a year earlier.

ENDS

(News report from Issue No. 265, published on Jan. 29 2016)

Business comment: Tough times for banks

JAN. 29 2016 (The Conway Bulletin) — Government policies towards the banking sector are key to survival during tough economic times.

In this new downturn, which has already lasted longer than the 2008/9 Financial Crisis, commodity prices have collapsed, hitting oil- exporting countries.

Kazakhstan and Azerbaijan have been among the hardest-hit economies in the South Caucasus and Central Asia.

In mid-2014, Kazakhstan planned to restructure its banking sector by imposing greater capital requirements. The Central Bank wanted the country’s banks to

increase their capital from 10b to 100b tenge ($54m to $543m at the time).

But in August 2015 the Central Bank abandoned the tenge peg to the US dollar, allowing it to fall sharply.

This relieved pressure on its currency but knocked plans to increase capital requirements for banks.

Bank deposits in Kazakhstan are now insured by the government. If the Central Bank had pushed forward with its new capitalisation plan after ditching the tenge-US dollar peg it would have meant that smaller banks would have had to close. The government would then have been under pressure to repay customers who had lost savings. Kazakh officials dodged this by scrapping the plan.

Azerbaijan, by contrast, has pushed ahead with increasing capital requirements at banks despite a 35% fall in its currency over the past month. This has forced small banks to close and larger banks to merge.

All this before introducing universal insurance on deposits. Until now, only savers with up to 30,000 manat ($18,400) were insured.

Time will tell which of the two strategies pays off.

ENDS

(News report from Issue No. 265, published on Jan. 29 2016)

Turkmen President holds currency control talks

JAN. 25 2016 (The Conway Bulletin) – Turkmenistan’s President Kurbanguly Berdymukhamedov said he wants the government to keep a stricter control on the currency market, hinting that the country might soon revise its monetary policy. Mr Berdymukhamedov has also voiced his dissatisfaction of a number of government officials in the past few weeks, a sign of a possible government reshuffle.

ENDS

(News report from Issue No. 265, published on Jan. 29 2016)

EU sends 15m euro to Kyrgyzstan

JAN. 26 2016 (The Conway Bulletin) – The European Union said it had released the second tranche of a 30m euro loan and grant to Kyrgyzstan designed to support and promote stability and democracy. Of the final 15m euro payment, 5m euro was a grant and 10m euro was a loan. The EU said the payment was “to support the restoration of a sustainable external financial situation for the Kyrgyz Republic.”

ENDS

(News report from Issue No. 265, published on Jan. 29 2016)

Editorial: Emergency loan for Azerbaijan

JAN. 29 2016 (The Conway Bulletin) – The IMF’s arrival in Baku is a game-changer. For the Azerbaijani government to invite the IMF to Baku means that their economy is in a more perilous position then they had been letting on.

The manat has lost 35% of its value over the past month; demonstrations have stirred in regional cities; inflation is rising; jobs are disappearing.

We know all this but we’ve also been told that the Azerbaijani government has, officially at least, saved up around $35b in its sovereign wealth fund for exactly this sort of scenario.

Why then, would Azerbaijan invite the IMF to Baku to discuss a loan? The impression that the IMF’s arrival in Baku had created is that things in Azerbaijan are worse than they have been letting on. Perhaps the authorities haven’t really saved up $35b. Perhaps they don’t have access to all the $35b.

What is known is that IMF are in town until the end of next week and that Azerbaijan’s finances, and the extent of their dire financial scenario is currently shrouded in mystery.

ENDS

(Editorial from Issue No. 265, published on Jan. 29 2016)