Tag Archives: economy

Currencies: Kyrgyz som falls to lowest level in a decade

SEPT. 2 2015 (The Conway Bulletin) – The Kyrgyz som lost 5.4% of its value on Sept. 1 falling to 66 som to $1, the biggest fall by any currency in Central Asia and the South Caucasus over the past week and the lowest value for the som against the US dollar for at least a decade.

This was also the som’s biggest one-day loss since March 2014. The Kyrgyz government, like the rest of Central Asia, has been battling to defend its currency against a sharp fall in the value of the Russian rouble, still the main driver of regional economic growth.

It’s unclear what pressured the Kyrgyz som to fall so severely but a few days earlier the head of the Central Bank Tolkunbek Abdygulov had said that the currency had dropped by 10.3% in 2015 despite the the government spending nearly $180m to protect its value.

“The National Bank will have enough reserves to avoid sharp fluctuations in the exchange rate of the som. Now the situation on the market is stable. There are no reasons for anxiety and panic,” media quoted Mr Abdygulov as saying on Aug. 25.

His statement and the subsequent fall in the value of the som suggest that the Kyrgyz Central Bank may be struggling to maintain its value.

Across the border in Kazakhstan, the Kazakh tenge has been stable at a level of 242/$1 during the past week, down from the a high of 252/$1 in August. The Kazakh Central Bank’s decision to adopt a new benchmark interest rate policy on Sept. 2, did not appear to have a significant impact on the exchange rate.

Elsewhere in Central Asia, the Tajik somoni and the Uzbek sum remained substantially unchanged. Currencies in the South Caucasus kept their against the US dollar throughout the week, fluctuating by just 1%.

ENDS

(News report from Issue No. 246, published on Sept. 4 2015)

Russia blocks Uzbek-bound dairy products

SEPT. 1 2015 (The Conway Bulletin) – Russia’s health department blocked the transit of 40 tonnes of dairy products from Latvia and Germany from travelling across its territory to Uzbekistan. Reports said the shipment had broken transit rules. European producers have dodged sanctions on Russia by sending products to Uzbekistan which they then send onto Moscow.

ENDS

(News report from Issue No. 246, published on Sept. 4 2015)

Georgian MPs vote against veto

SEPT. 3 2015 (The Conway Bulletin) – Georgia’s parliament voted to overrule a veto by President Giorgi Margvelashvili that would have blocked the adoption of a controversial bill that stripped the Central Bank of its supervisory powers over the commercial banking sector. International organisations have criticised the bill as politically-motivated. The Central Bank has argued with the government over economic policy.

ENDS

(News report from Issue No. 246, published on Sept. 4 2015)

Comment: Kazakhs steady themselves for the impact of Devaluation 2

SEPT. 4 2015 (The Conway Bulletin) – Timing is everything and fortune favoured me last month.

By chance, I flew into Almaty 24 hours after Kazakh President Nursultan Nazarbayev and Central Bank chief Kairat Kelimbetov had released the tenge from its US dollar peg.

This effectively triggered a 23% devaluation of the currency. I would be able to experience Ground Zero in the latest Emerging Markets currency crisis. If you’re a journalist, this is a good thing.

But if my timing had been fortunate, Mr Nazarbayev and Mr Kelimbetov hadn’t been so lucky. They had overseen an earlier devaluation of the tenge, let’s call this Devaluation 1, which hadn’t worked out. The current currency crisis, Devaluation 2, is a direct result of this mismanagement.

Without warning Mr Nazarbayev and Mr Kelimbetov had devalued the tenge by 20% in February 2014, hoping to make the Kazakh economy more competitive. The timing was poor, though, and within weeks Russia had become a pariah state in the eyes of the West because of its support for rebels in east Ukraine. Sanctions followed, denting Russia which is still the main economic driver in Central Asia. Within another six months oil prices collapsed and the Russian rouble went into free-fall.

The original Nazarbayev-Kelimbetov devaluation strategy, was undermined.

And this forced them into a corner. Defying economic logic and trying to rescue their own pride, they defended the new tenge-dollar peg despite neighbouring currencies sinking and oil prices flat-lining.

In the end, Mr Nazarbayev and Mr Kelimbetov bowed to the inevitable. The tenge is now around 39% cheaper than it was in January 2014.

On the streets of Almaty, ordinary Kazakhs generally greeted the devaluation with a shrug. There was also a palpable sense of relief. A second devaluation was always going to happen. The day after the devaluation, the run on the exchange kiosks was for tenge which signalled that most people thought it had bottomed out and wouldn’t devalue further.

And, crucially, it felt as if people had seen it all before.

We know what is going to happen next. The fallout from Devaluation 1 will guide us through the fallout from Devaluation 2. There will be price inflation, followed by salary rises. There will be job losses and the competitiveness generated by the devaluation will recede.

The major difference now is that the tenge currency is, theoretically at least, floating free.

By James Kilner, Editor, The Conway Bulletin

ENDS

(News report from Issue No. 246, published on Sept. 4 2015)

Turkmen president orders economic policy

AUG. 4 2015 (The Conway Bulletin) – At a government meeting, Turkmen president Kurbanguly Berdymukhamedov ordered his ministers to investigate how they could pursue a more aggressive import substitution policy. This is a policy that Turkmenistan’s neighbours have also talked of introducing.

ENDS

(News report from Issue No. 246, published on Sept. 4 2015)

Economy grows in Georgia

AUG. 31 2015 (The Conway Bulletin) – Georgia’s economy grew by about 3% in the 12 months to the end of July, Geostat, the Georgian statistics agency, said. Geostat said that this was roughly inline with June and above April and May’s growth rate. The economies of the South Caucasus have been struggling this year to deal with the falling rouble and low oil prices.

ENDS

(News report from Issue No. 246, published on Sept. 4 2015)

Kazakh Central Bank picks new interest rate

SEPT. 2 2015 (The Conway Bulletin) – Kazakhstan’s Central Bank picked the overnight repo rate as its benchmark interest rate and main tool for manipulating monetary policy, setting it at 12%.

The decision came two weeks after the Central Bank allowed the tenge to free float, abandoning the peg to the US dollar. The free-float pushed the value of the tenge down by 23%, the second devaluation in less than two years.

“This rate is aimed at directing nominal rates in the money market and will become a key instrument of the credit and monetary policy, in the new inflation-targeting regime,” the Central Bank said in a statement.

The tenge traded at around 240 to $1 immediately after the new interest rate was announced, having strengthened from 252 to $1 after the US dollar peg was ditched in August. By comparison, in February 2014, before the first devaluation, the tenge traded at 155 to $1.

Analysts welcomed the relatively high benchmark interest rate, saying that the tenge needed this level of support.

Sabit Khakimzhanov, head of research at Halyk Finance, said that the Central Bank may even need to increase this key interest rate by one percentage point to 13%.

“The interest rate in the money market is the only instrument left at the disposal of the NBK (National Bank of Kazakhstan) to manage inflation and the exchange rate,” he said.

“Only by keeping the rates credibly high, that is, at a level sufficiently high to enforce the necessary discipline and for a sufficiently long time. The interest rate corridor 12-14% meets these requirements.”

Other analysts said the high interest rate may encourage Kazakhs to keep their money in the bank.

“The high rate levels are clearly seen as securing the banking system from deposit outflows and anchoring inflation expectations,” Dmitry Polevoy, a Moscow-based economist at ING Groep NV, told Bloomberg News.

Previously the key interest rate had been the ineffective refinancing rate set at 5.5%.

Earlier this year the Kazakh government said that targeting inflation was going to be the main driver of its future economic policies.

The problem is that with the tenge devaluing and with oil prices remaining stubbornly low, the Kazakh government has already said that inflation is likely to climb above its 6-8% corridor target.

ENDS

(News report from Issue No. 246, published on Sept. 4 2015)

Kazakh Central bank unveils new rate

SEPT. 3 2015 (The Conway Bulletin) – Kazakhstan’s Central Bank said that it was introducing a new key interest rate that would be its main tool for manipulating monetary policy. It set the new refinancing rate at 12%.

ENDS

(News report from Issue No. 246, published on Sept. 4 2015)

Tajik leader talks of crisis

AUG. 28 2015 (The Conway Bulletin) – Tajik president Emomali Rakhmon ordered his government to take urgent action to mitigate the impact of the worsening economic crisis hitting Central Asia. In one of his most frank omissions that Tajikistan’s economy is rapidly worsening, Mr Rakhmon told his ministers to adopt import substitution policies. Tajikistan has been hit by the drop in remittances from Russia.

ENDS

(News report from Issue No. 246, published on Sept. 4 2015)

Kyrgyz imports fall

AUG. 28 2015 (The Conway Bulletin) – The value of imports into Kyrgyzstan fell by nearly 17% in the first half of the year, media reported by quoting official statistics. The data, while not giving specifics, still highlighted the economic slowdown in the region. Kyrgyzstan, like the other Central Asian countries, has been dealing with dropping remittances from Russia and a sharp fall in the value of its currency.

ENDS

(News report from Issue No. 246, published on Sept. 4 2015)