JAN. 6 2016 (The Conway Bulletin) – The Tajik Central Bank imposed currency withdrawal restrictions on account holders as the Tajik somoni currency continued to lose value, media reported. It limited cash withdrawals to $400 per person. In December, the government closed down exchange kiosks, blaming them for pressuring the value of the somoni.
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(News report from Issue No. 262, published on Jan. 8 2016)
JAN. 7 2016 (The Conway Bulletin) – The World Bank cut its economic outlook for Kazakhstan in 2016 to 1.1% because of sustained low oil prices. It had earlier predicted growth of 1.9% in 2016, up from 0.9% in 2015. Kazakhstan has been hard hit by the sudden and sustained fall in the price of oil.
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(News report from Issue No. 262, published on Jan. 8 2016)
JAN. 6 2016 (The Conway Bulletin) – Georgia’s President Giorgi Margvelashvili has started searching for a successor to Giorgi Kadagidze who will complete his 7-year term as head of the Central Bank in February. Mr Margvelashvili’s nominee will have to be voted in by the Parliament before he or she can assume office.
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(News report from Issue No. 262, published on Jan. 8 2016)
JAN. 7 2016 (The Conway Bulletin) — The New Year did not change the fortunes of currencies in the South Caucasus and Central Asia. All currencies are still suffering against a strong US dollar and Central Banks are intervening to prop them up.
Undoubtedly, the most notable decision came just before the holidays when Azerbaijan ditched its currency peg to the dollar and let the manat slide. After a 48% fall, the currency found its equilibrium at 1.55/$1. It is now trading at 1.57/$1.
In Kazakhstan, the tenge recovered towards the end of December, but it slid to 345/$1 in January.
Tajikistan witnessed the worst start of the year, with its somoni currency falling 2.5% in the first week of January, trading at 7.17/$1. Notably, exchange points have been charging a premium of 8-10% on currency transactions in the past few weeks.
In Kyrgyzstan the Central Bank has kept the som stable at 75.9/$1 by intervening several times.
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(News report from Issue No. 262, published on Jan. 8 2016)
JAN. 8 2016 (The Conway Bulletin) – Both Kazakhstan and Azerbaijan ditched their currencies’ peg to the US dollar in 2015, triggering sudden and sustained depreciation of their currencies.
These were tough, but necessary calls by their Central Banks as these currencies were over-valued compared to oil and the Russian rouble.
What happens next differentiates Azerbaijan and Kazakhstan.
Kazakhstan has allowed, with the odd intervention, its currency to devalue. The Azerbaijani Central Bank, by contrast and very much in keeping with the tight way that the country is run, appears determined to anchor the manat more-or-less at its current rate against the US dollar. The rhetoric may be of liberalisation but the actions are of a conservative and uptight Central Bank.
And this comes across in other ways too. A couple of weeks after the devaluation, Azerbaijan imposed a rule that only people presenting their official ID could change more than $500 into foreign currencies. This could be the first of many exchange controls.
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(Editorial from Issue No. 262, published on Jan. 8 2016)
DEC. 31 2015 (The Conway Bulletin) – Azerbaijan is considering closing several of its overseas embassies as it looks for ways to cut costs during a period of sustained low oil and gas prices, media reported quoting a foreign ministry spokesman. Azerbaijan has expanded its diplomatic missions over the past few years in line with burgeoning revenues from oil and gas sales. Profit from those sales has now collapsed.
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(News report from Issue No. 262, published on Jan. 8 2016)
JAN. 7 2016 (The Conway Bulletin) — After Azerbaijan abandoned its currency peg to the US dollar, leading to a second sharp depreciation of the manat in 10 months, confidence in South Caucasus and Central Asian currencies reached a new low.
2015 was a tough year, which began with Turkmenistan slashing 19% off the value of its manat currency on Jan. 1, hinting that oil and gas exporting countries were facing bad times.
The following February, Azerbaijan devalued its currency and later in August Kazakhstan stopped pegging the tenge to the US
dollar, a decision that triggered a sharp depreciation. But although this trend is closely linked to the fall in oil prices since the summer of 2014, that’s not the whole story.
After the rouble collapsed at the end of 2014, it was only a matter of time for countries that enjoyed high trade volumes with Russia. They had to follow suit and devalue their currencies to remain competitive.
In addition, devaluing and unpegging a currency may also serve as a way to give stability to the domestic budget.
Kazakhstan’s Central Banker Daniyar Akishev said the tenge will follow the price of oil. That way energy-exporting firms will have a chance of balancing their books.
But countries with unpegged currencies need to keep an eye on speculation. Azerbaijan now requires a valid ID for currency exchange of more than $500 in value. Tajikistan put in place limits to ATM withdrawals of $400 and could reduce the number of licences for exchange points.
And interventions are unlikely to cease. Kyrgyzstan and Georgia’s Central Banks have already marked the first week of 2016 with purchases in the currency market.
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(News report from Issue No. 262, published on Jan. 8 2016)
DEC. 23 2015 (The Conway Bulletin) – Kazakhstan’s parliament ratified a deal to take a $1b loan from the Asian Development Bank to plug a gap in the government’s finances. The deal was agreed in November. The sharp fall in oil prices has hit Kazakhstan’s economy hard shrinking growth rates and government revenues.
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(News report from Issue No. 262, published on Jan. 8 2016)
DEC. 18 2015 (The Conway Bulletin) – The Kazakh tenge fell to its record low against the dollar this week, after the US Federal Reserve decided to raise interest rates by a quarter of a percentage point, a move that will inevitably dent Kazakhstan’s fragile economy.
On the eve of the celebrations for the 24th anniversary of Kazakhstan’s independence, the tenge had already bottomed out at 337.8/$1 (Dec. 15). When trading re-started after two days of holidaying in Kazakhstan and an interest rate rise in the US, the tenge fell another 1.4% to hit 342.5/$1.
The tenge now trades at half its value in August, before the Central Bank ditched the Tenge-US dollar peg.
The Fed’s rate rise decision on Dec. 16 was expected, but it was still bad news for Emerging Markets.
And Kazakh state-owned companies seemtobeplanningforworsetocome.
An alleged official letter sent out by state-owned energy company Kaz- munaigas and leaked on social media, instructed its subsidiaries to draft plans for the period 2016-2020 accounting for oil prices at $30/barrel and a tenge/dollar rate of 360 (Dec. 14). Brent oil is currently trading at $36.70/barrel.
Kazmunaigas could not be reached for comment.
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(News report from Issue No. 261, published on Dec. 20 2015)
DEC. 14/19 2015 (The Conway Bulletin) – Sources working in Turkmenistan’s public sector told the opposition website Chronicles of Turkmenistan that from January 2016 the state will start paying part of government employees’ wages in bonds in order to save money.
A few days later, the state-run news agency confirmed the government was going to start issuing 5-year bonds, although it didn’t specify how the bonds would be distributed. It did say, though, that the main aim of the bonds was to develop Turkmenistan’s financial markets.
The Chronicles of Turkmenistan, which is a well-respect website, instead said that several government agencies would pay “12% or more of the salary” in government bonds.
Although rich in energy resources, Turkmenistan has had to adjust to the economic malaise that is pervading the Central Asian region.
The news flow from Turkmenistan is weak but there are signals that the economic downturn is hurting.
Chronicles of Turkmenistan also speculated that the cash withheld from government salaries would be used to pay for the 2017 Asian Indoors Games in Ashgabat.
In January 2015, Turkmenistan devalued its manat currency by 20%. Last month, the government allegedly banned public officials from withdrawing US dollars at exchange points.
Giving government workers bonds instead of cash effectively means deferring salary payments.
In October, the government said it would draft a plan for the sale of government companies in 2016, effectively an admission that it was running out of cash. The bond scheme is another attempt by to cut costs.
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Copyright ©The Conway Bulletin — all rights reserved
(News report from Issue No. 261, published on Dec. 20 2015)
