Tag Archives: economy

IBA creditors criticise debt restructure deal in Azerbijan

LONDON, MAY 23 2017 (The Conway Bulletin) — Azerbaijan’s reputation for economic competence was dealt another blow after creditors of the International Bank of Azerbaijan lined up to criticise a debt restructuring plan.

Senior officials unveiled the plan at a tense meeting with creditors in London, nearly two weeks after IBA failed to pay a scheduled repayment on a $100m loan. IBA now says that it has to restructure $3.3b of debt. This includes forcing creditors to take a 20% writedown.

In a statement after the meetings, Fitch the ratings agency said that the restructuring plan would effectively nationalise IBA’s debt without offering any essential structural reforms.

“The Negative Outlook reflects continued risks and uncertainty around the macroeconomic and financial sector adjustment under way,” it said.

IBA also said that it would sell off its subsidiaries in Russia and Georgia, IBA-Moscow and IBA-Georgia, as part of its restructuring plan.

IBA controls around 60% of Azerbaijan’s banking sector. The sector has been hit hard by the collapse in the price of oil which Azerbaijan relies on for income. This knocked around 50% off the value of the Azerbaijani manat in 2015/16 and forced the economy into a sharp recession.

Azerbaijani banks’ bad loans portfolios have grown forcing several to declare bankruptcy or merge.

The government has ploughed money into IBA to prevent it from defaulting, increasing its stake to 80% from 55%, and bought its bad debt.

Despite this state support, IBA still failed, embarrassing the government and its senior management.

Now, though, creditors have to decide whether to back the restructuring plan with a two-thirds majority needed to proceed. At its core the restructuring deal means that creditors will swap IBA debt for sovereign bonds, most at a 20% discount.

Many creditors were unimpressed.

Lutz Roehmeyer bonds at Landesbank Berlin Investment, including IBA debt, told Bloomberg News that he planned to vote against the deal.

Kazakhstan’s state pension fund is among the major creditors of IBA. Last week it emerged that it had bought $250m of IBA debt in 2014, shortly after the oil price had started to fall, drawing allegations of incompetence from MPs. The Kazakh Central Bank has opened an investigation into the purchase.

ENDS

(News report from Issue No. 330, published on May 28 2017)

Head of Uzbek Central Bank dies

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MAY 24 2017 (The Conway Bulletin) — The head of Uzbekistan’s Central Bank, Fayzulla Mullajanov died aged 67 from complications linked to kidney disease, media reported. Mullajanov had been head of the Central Bank for 14 years and retained his position when Shavkat Mirziyoyev took over as president after Islam Karimov died in September 2016. In reality, the Uzbek Central Bank has little independence from central government.

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(News report from Issue No. 330, published on May 28 2017)

Georgia and China sign free trade deal

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TBILISI, MAY 19 2017 (The Conway Bulletin) — A new free trade deal with China will allow Georgia to position itself at the centre of global commerce, Georgian PM Giorgi Kvirikashvili said .

He was commenting on a deal signed by officials with their Chinese counterparts a few days earlier, the first Free Trade Agreement (FTA) with China by any former Soviet State.

Both the Georgian and the Chinese parliaments still have to ratify the agreement which is expected to enter into force by the end of the year.

“Georgia is gradually reclaiming its geostrategic function, which the country has enjoyed historically,” Mr Kvirikashvili was quoted as saying.

China has become an increasingly important trading partner for Georgia. According to Geostat, between 2009 and 2016 the value of exports to China tripled.

Nikoloz Khundzakishvili, head of the Georgian branch of the International Chamber of Commerce, told the Bulletin that the free trade deal with China will also be important for the wider region.

“This is a huge market with more than 1b customers. This will be a tremendous opportunity for Georgian products,” he said.

“Georgia will be like a link between China and our neighbourhood.”

Agricultural products, wine and mineral water are the main items exported from Georgia to China. The agreement will scrap custom duties for about 94% of Georgian products exported to China.

And it works both ways. Maya Grigolia, senior researcher, at the ISET Policy Institute in Tbilisi, said Georgia was also hoping for an increase in Chinese investment once the free trade deal comes into law, as China’s companies look to take advantage of Georgia’s liberal trade laws and deals with the European Union.

“Because of its unique geographical location, Georgia has been a hub for transport and international trade since ancient times,” she said.

China has already become a major investor in Georgia’s telecoms, tourism, financial and construction sectors.

ENDS

(News report from Issue No. 330, published on May 28 2017)

Economic activity rises in Armenia

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MAY 22 2017 (The Conway Bulletin) — Economic activity in Armenia between January and April was 5.7% higher than in the same period in 2016, media reported quoting the national statistics agency. It said that the biggest driver of this economic upturn was the construction sector which saw an increase of 13.4%. Agricultural production declined, though, by 2.9%, a reflection of the weaker Armenian dram.

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(News report from Issue No. 330, published on May 28 2017)

Turkmenistan touts new gas field discovery

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MAY 6 2017 (The Conway Bulletin) — In a boost for its ambitions to become the region’s top gas exporter, Turkmenistan said that it had discovered a potentially large gas field near the Caspian Sea.

New gas field finds, especially of the size touted by Turkmenistan, are rare and the announcement created excitement in the oil and gas sector.

“According to the preliminary estimates, the well’s productivity is 500,000 cubic meters of natural gas and 150 tonnes of gas condensate per day, which confirms the huge hydrocarbon potential of the coastal zone and the shallow waters of the Caspian Sea,” the state-owned news agency Turkmenistan Today said of the discovery at the Uzunada area.

“Increasing hydrocarbon production is one of the priorities of the domestic fuel and energy complex.”

Turkmenistan’s economy is heavily skewed towards gas exports, mainly from the Galkynysh field, the second largest in the world, in the east of the country. A pipeline from the field feeds gas directly to China and a new pipeline is being built that will pump gas to Pakistan and India.

Turkmen President Kurbanguly Berdymukhamedov has talked of diversifying the Turkmen economy towards fertilizer and electricity production, but gas still dominates. The fall in gas prices has hit it hard and even forced a rare admission of economic weakness, with a cut to the manat currency in 2015.

If the new field was commercially exploited and did manage to produce at the rate of 500,000 cubic metres of gas per day claimed by Turkmenistan, it would add significant capacity to the country’s overall production. The Galkynysh field produces gas at around 1.7m – 2m cubic metres per day.

ENDS

(News report from Issue No. 328, published on May 12 2017)

Currencies: Kazakhstan’s tenge, Azerbaijan’s manat

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MAY 12 2017 (The Conway Bulletin) — Pledges to cut output and to support prices pushed up oil to $50.85/barrel, its highest in May, giving support to both the Kazakh tenge and the Azerbaijani manat. They both inched up slightly, with the tenge finishing on 315.54/$1, up nearly 1%, and the Azerbaijani manat hitting 1.6775/$1, also up around 1%.

As the graph shows, the tenge has risen by 8.6% since the start of November, giving the economy and the Central Bank much-needed breathing space. Gains since mid- February, though, have been limited and a deeper look at tenge shows that it has under performed against oil prices. The price of Brent oil has increased by 13.4% since the start of November, far outstripping tenge.

Of the other currencies, the long Victory Day holiday slowed trade and there was little movement, up or down, except with the Uzbek som. This is a tightly managed currency and the authorities have been slowing cutting its value to reflect a general slowdown in the economy. Once again, over the course of the last week, the som’s value has fallen by around 0.8%.

As for equities, it was also a fairly steady week with Centerra Gold gaining the most, up 7.5%. Caspian Sunrise stock is inelastic and changes tend to be wild.

ENDS

(News report from Issue No. 328, published on May 12 2017)

EBRD says Azerbaijan’s economy will shrink

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MAY 10 2017 (The Conway Bulletin) — In its updated assessment of the Azerbaijani economy, the European Bank for Reconstruction and Development (EBRD) said that it expected its economy to shrink by 0.5% this year, the second consecutive year that Azerbaijan’s economy will contract, but that it will grow by 2% in 2018. Azerbaijan’s economy has been hit hard by a sharp slump in oil prices since mid-2014.

ENDS

(News report from Issue No. 328, published on May 12 2017)

House prices still fall in Kyrgyzstan

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APRIL 28 2017 (The Conway Bulletin) — House prices in Kazakhstan are continuing to fall, an indication that the economy is still struggling to pull out of a deep slump linked to the collapse in oil prices since mid- 2014. The price tracking website homsters.kz said that only in Almaty were prices beginning to recover. The housing market fell sharply after a 50% cut in the value of the tenge in 2015.

ENDS

(News report from Issue No. 327, published on May 5 2017)

Economic growth picks up in Georgia

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APRIL 28 2017 (The Conway Bulletin) — Year-on-year economic growth in Georgia accelerated to 5% in the first quarter of 2017 because of an increase in exports and remittances, the statistics service said. The rise beats the Georgian government’s expectations of a 4% rise for the whole of 2017.

ENDS

(News report from Issue No. 327, published on May 5 2017)

Currencies: Azerbaijani manat

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MAY 5 2017 (The Conway Bulletin) — Despite a fall in oil price to $48.48 on May 4 and $49.10 on May 5 (that’s the price of a barrel of Brent) the Azerbaijani manat managed to regain some of the ground it has lost in the past few weeks.

Oil and gas are the driver of the Azerbaijani economy but although prices have fallen from around the $55 mark that OPEC has been targeting the manat was trading at 1.6972/$1, near recent highs.

As the graph shows, since the beginning of April the manat has gain 2.2% against the US dollar while oil prices have fallen by 5.6%. The main reason for the slump in oil prices is a concern about growing US stockpiles of oil.

On the equities side of the markets, KAZ Minerals, formerly called Kazakhmys has had a bumpy ride. It shares surged after strong Q1 results showed that output had grown. It hit a 5-week high of 503.5p on May 1 only to fall heavily in the following few days. A sharp drop in the price of copper, its main export, forced down its share price to 445.6p by May 5.

This was a heavier fall than the fall in the price of copper which dropped 5% to $252.85/lb. The fall in copper prices was linked to concern over China’s slowing industry and the failure of US President Donald Trump to deliver on promises to support copper prices.

ENDS

(News report from Issue No. 327, published on May 5 2017)