Tag Archives: economy

Georgia’s Central Bank raises interest rates

NOV. 4 2015 (The Conway Bulletin) – Georgia’s Central Bank increased its key interest rate to 7.5%, its highest level since Sept. 2011, to try and dampen rising inflation.

In January, Georgian interest rates were 4%, demonstrating just how aggressively its Central Bank has pushed up the cost of borrowing.

In a statement, the Georgian Central Bank said that Consumer Price Inflation now measured 5.8%, pushed up by a rise in the cost of imported goods and a jump in electricity prices.

“According to the current forecast, in the beginning of 2016 the inflation will remain above its target value, will start decreasing afterwards and will return to its target value of 5% in the second half of 2016,” the Central Bank said in a statement.

This year, similarly to other cur- rencies in the region, the Georgian lari has lost around 28% of its value.

ENDS

(News report from Issue No. 255, published on Nov. 6 2015)

Markets: Monetary policies in Georgia and Kazakhstan

NOV. 5 2015 (The Conway Bulletin) — In an effort to tame inflation, Georgia raised its key interest rate by 50 base points to 7.5%

In October, annualised inflation in Georgia rallied to 5.8%, above the Central Bank’s target of 5%. Since the beginning of the year, the lari has lost over 27% of its value against the US dollar. The Central Bank intervened heavily in the currency market last month, keeping the lari steady. It sold $20m during its latest intervention on Oct. 27.

Across the Caspian Sea, the Kazakh Central Bank postponed a monthly interest rates meeting, scheduled for Nov. 6, a decision that baffled observers and made the Central Bank look amateurish.

After the sacking of former chief Kairat Kelimbetov and the appointment of Central Bank veteran Daniyar Akishev, investors and savers were eager to hear what the new chief would say at his first press conference. It looks like people will have to wait a little longer.

Instead, the Bank issued a short statement the day before the monetary policy meeting was due, saying it will no longer intervene heavily in the currency market to preserve the exchange rate, as it wants to avoid depleting its reserves. In its statement, the Bank failed to fix a date for the next monetary policy meeting.

If anyone is still wondering why everyone has lost trust in the tenge and the Central Bank, here’s why.

ENDS

(News report from Issue No. 255, published on Nov. 6 2015)

Kazakh president sacks Central Bank chief

NOV. 2 2015 (The Conway Bulletin) – Kazakh President Nursultan Nazarbayev sacked Kairat Kelimbetov as head of the Central Bank, two years after he was handed the job.

He promoted 39-year-old Daniyar Akishev, a former deputy head of the Central Bank and his personal economic adviser, to take over from Mr Kelimbetov.

Under Mr Kelimbetov’s watch a combination of low oil prices and a recession in Russia has battered Kazakhstan’s economy. The tenge currency has lost around half its value since Feb. 2014.

Mr Nazarbayev said that he had lost confidence in Mr Kelimbetov. “The lack of confidence in the economy and the national currency — the tenge — should not be allowed to continue,” he said in a statement on his website. “It’s important to work to fix this poor performance.”

The Kazakh Central Bank has lost credibility over the past couple of years. It has flip-flopped on monetary policy and has spent billions of US dollars propping up its currency before defaulting first in Feb. 2014 and then in August this year.

On each occasion, events have appeared to wrong-foot Mr Kelimbetov.

In 2014, he admitted at a press conference after the devaluation that he hadn’t expected it to happen. In August he said that the tenge had moved to a free float against the US dollar before presiding over several more interventions to prop up its strength.

But news that he had been sacked failed to halt the slide in the value of the tenge. By Friday, Nov. 6, it had touched an all-time low against the US dollar of 310/$1.

Inflation data for October presented Mr Nazarbayev and his advisers with more bad news. Pushed up by the devaluation in August, inflation for the year to end-October measured over 9%.

And the disorganisation surrounding the Central Bank also appeared to continue. Shortly after it released a statement saying it would no longer spend millions of US dollars propping up the tenge, the Central Bank cancelled its monthly interest rate meeting without giving a reason or setting a new date.

ENDS

(News report from Issue No. 255, published on Nov. 6 2015)

Currencies: Kazakhstan’s tenge, Kyrgyzstan’s som

NOV. 5 2015 (The Conway Bulletin) — The tenge finally broke through the 300/$1 level this week. People in Kazakhstan watched their currency lose ground against the US dollar on Thursday and Friday, while the Central Bank, under a new leadership, refrained from any intervention. The official exchange rate reached the record-breaking level of 310/$1 late on Friday, an 11% fall in one week.

The Kyrgyz som lost 1% of its value in one week, hitting 70/$1 on Friday.

Other currencies in the region remained stable throughout the week.

In a rare statement, the Uzbek Central Bank said it would let the sum devalue faster in 2015, compared to 2014. The official exchange rate, currently at 2,692/$1, showed a 10% fall in the first 10 months of the year. But this is about half the unofficial rate. On the black market, $1 can be purchased for as much as 5,900sum, according to the dollaruz.com website.

ENDS

(News report from Issue No. 255, published on Nov. 6 2015)

Business comment: Debt to GDP in Kyrgyzstan

NOV. 6 2015 (The Conway Bulletin) — Kyrgyzstan has the highest debt-to- GDP ratio of any country in Central Asia and the South Caucasus, spurring a heated debate this week in the Kyrgyz parliament.

MPs questioned Temir Sariyev, seeking endorsement to continue his job as PM, on the sustainability of Kyrgyzstan’s debt which reached $3.4b in November.

Oil and gas importers, like Kyrgyzstan, typically show higher level of debt compared to energy- rich countries. Kyrgyzstan has a debt-to-GDP ratio of 53% debt ratio.

And this is set to continue in the increasingly tight economic climate which has dragged down essential remittances from Russia to Kyrgyzstan. The IMF said Kyrgyzstan’s debt-to-GDP ratio would reach 60% in 2015 and 62% in 2016.

Kyrgyz deputies said they were worried the country might default under these circumstances.

Mr Sariyev dismissed the rumours of default indicating that other countries have far worse debt levels and do not default. According to Mr Sariyev debt is important for the Kyrgyz economy, financing important infrastructure projects.

Still, Kyrgyzstan shows the worst fiscal balance and debt ratios in the region. Armenia, also an energy importer, has a 41% debt ratio, and Georgia 38%, according to the IMF. Tajikistan posted a debt-GDP level of just 28% in 2014, but it will grow to almost 33% in 2015, a direct consequence of the regional economic downturn.

ENDS

(News report from Issue No. 255, published on Nov. 6 2015)

Kazakh parliament passes mortgage bill

NOV. 5 2015 (The Conway Bulletin) – The Kazakh parliament passed a bill which will ban mortgages being given in US dollars unless the applicant earns his or her salary in US dollars. The aim of the bill, which needs to be signed by Pres. Nursultan Nazarbayev before becoming law, is to reduce households exposure to potential bad debt and to give the ailing tenge currency a boost.

ENDS

(News report from Issue No. 255, published on Nov. 6 2015)

Kazakh car imports halve

OCT. 29 2015 (The Conway Bulletin) – In Jan.-Aug. 2015, Kazakhstan imported 54,000 cars, roughly half the amount of cars imported during the same period last year. Russia accounted for 85% of the car import market. Between January and August, the Kazakh tenge was overvalued against the rouble, making imports from Russia cheap. The Kazakh Central Bank effectively devalued the tenge in August.

ENDS

(News report from Issue No. 254, published on Oct. 30 2015)

Kazakhstan extends capital amnesty

OCT. 23 2015 (The Conway Bulletin) – The Kazakh Senate extended a deadline to repatriate capital that has been offshored by one year to Dec. 31, 2016. Analysts said this was a response to a poor recovery rate. The Kazakh Central Bank has made attracting capital back to Kazakhstan one of its key policies.

ENDS

(News report from Issue No. 254, published on Oct. 30 2015)

Currency: Kazakh tenge, Kyrgyz som

OCT. 30 2015 (The Conway Bulletin) — In this current regional economic crisis, when currencies are stable it has to be positive.

The US Federal Reserve Bank kept interest rates unchanged, giving some more breathing room to currencies across Central Asia and the South Caucasus.

This was one of the first stable weeks for currencies in the region after heavy turbulence shook, ravished even, the markets.

The three free-floating currencies followed a similar pattern this week, weakening only marginally.

The Kazakh tenge lost just 0.5% of its value against the US dollar, ending at 279.2/$1 on Friday. The Kyrgyz som followed suit losing 0.7% of its value at 69.4/$1. The Georgian lari was stable at 2.39/$1.

In Tajikistan, the Central Bank said the somoni lost 30% of its value in the year to Sept. 2015. On Friday, it was stable at 6.62/$1.

ENDS

(News report from Issue No. 254, published on Oct. 30 2015)

Markets: Remittances from Russia to South Caucasus and Central Asia fall

OCT. 27 2015 (The Conway Bulletin) — Remittances from Russia to Central Asia and the South Caucasus keep falling, a major problem for countries which are heavily reliant on cash sent back by workers in Russia. Think Tajikistan and Kyrgyzstan in particular.

Fresh data from the Russian Central Bank shows a fall of 12% in Q3 2015 compared to the same period last year for all countries in our region, except Georgia, which lies outside the Russian data.

For Kyrgyzstan and Tajikistan, remittances from migrant workers are vital, accounting for around half of their GDP. Uzbekistan and Armenia are also heavily reliant on money transfers from Russia.

Remittances to Kazakhstan and Kyrgyzstan showed a first sign of recovery in Q3, although their overall balance for 2015 remains negative, compared to 2014. According to the Kyrgyz Central Bank, the value of remittances this year has dropped by around $400m to $1b.

Similarly, Tajikistan and Uzbekistan have lost as much as 35% of their remittances in the first nine months of 2015.

From rock bottom, it can only get better. Figures from the next two quarters will likely show a growth in the value of remittances, because the benchmark they will be measured against is the nadir of the crisis of last winter.

ENDS

(News report from Issue No. 254, published on Oct. 30 2015)