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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)

Kerry stops over in Uzbekistan and Turkmenistan on CAsia tour

NOV. 2/3 2015 (The Conway Bulletin) – On stopovers in Turkmenistan and Uzbekistan during his whirlwind tour of Central Asia, US Secretary of State John Kerry said that he had “robustly” raised human rights issues with the countries’ leaders privately despite shying away from criticising his hosts in public.

Human rights groups had urged Mr Kerry to make a major statement on the state of human rights in both Turkmenistan and Uzbekistan, countries they regard as among the most oppressive in the world.

Instead, Mr Kerry, in public at least, spoke about joint security concerns and about the need to keep democracy at the forefront of the region’s governance.

“In Central Asia and elsewhere people have a deep hunger for governments that are accountable and effective,” he was quoted as saying.

“We should have no doubt that progress in democratic governance does lead to gains in every other field.”

Perhaps Mr Kerry’s most important objective on his trip of the region was to reassure the leaders’ of the various countries that the United States was still interested in Central Asia despite quitting an air base outside Bishkek and appearing to cede influence to Russia and China.

Mr Kerry met Uzbek President Islam Karimov in Samarkand and later Turkmen president Kurbanguly Berdymukhamedov in Ashgabat. Mr Kerry was the first US Secretary of State to visit Ashgabat since James Baker in 1992, shortly after the collapse of the Soviet Union.

Media quoted Kerry at the end of his tour of Central Asia, summing up his most important aims.

“What we want to see is not a struggle between China and Russia and the United States in a zero-sum game,” he said. “What we want to see is a Central Asia that claims its place as an engine of growth at the heart of a modern and dynamic Asia.”

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)

Azerbaijani court consider Yunus appeal

NOV. 5 2015 (The Conway Bulletin) – A court in Azerbaijan was due to start considering an appeal by jailed human rights activists Leyla Yunus and Arif Yunus against their imprisonment in August for 8-1/2 and 7 years for various economic crimes. Human rights groups have said the authorities imprisoned Leyla and Arif Yunus to silence them.

ENDS

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

Plane crash kills Armenians

NOV. 4 2015 (The Conway Bulletin) – Five Armenian crew members, including the pilot, were killed in plane crash in south Sudan. The Antonov-12 cargo plane, operated by Armenia’s Ala International, was carrying 40 people.

ENDS

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

Akishev was groomed for Kazakh Central Bank top job

NOV. 2 2015 (The Conway Bulletin) – Daniyar Akishev’s promotion to head the Kazakh Central Bank may have taken observers by surprise but to those who know the 39-year-old, it is a job he has been groomed for.

Mr Akishev is a veteran of the Central Bank, where he worked in various positions from 1996 to 2014 before moving to the Akorda as economic adviser to President Nursultan Nazarbayev.

In 2007 Mr Akishev was rumoured to be in pole-position for taking on the role of new chief of the financial regulator.

Instead has was named deputy head of the Central Bank, a position he held for seven years, under three different bosses.

In particular, Central Bank insiders said he achieved professional maturity under Grigori Marchenko, a respected liberal economist, who often clashed with Mr Nazarbayev on economic policies.

There have been wobbles, though, in Mr Akishev’s rise to the top. In December 2008, ominously, he said the economic situation was ideal for Kazakhstan.

“The Central Bank has no problems with the exchange rate of the tenge, quite the contrary,” he told RIA Novosti in an interview.

Two months later, the Bank devalued the tenge by 19%.

Media quoted some local analysts as saying that Mr Akishev lacks independence because of his young age and his lack of political authority. But Mr Akishev is the same age as Mr Marchenko was when he was named head of the Central Bank for the first time in 1999 and is five years older than Oraz Dzhandosov was, when he became Central Bank chief in 1996.

Mr Akishev’s predecessor, Kairat Kelimbetov, who held the job for two years during which the tenge lost half its value, had a different profile and no background at the Central Bank.

Mr Akishev might have accepted possibly the toughest job in Kazakhstan, but he is also one of the few people in the country with the experience and background to take it on.

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)

Tele2 and Kazakhstan’s Altel team up to establish new mobile company

NOV. 4 2015 (The Conway Bulletin) — Swedish telecoms company Tele2 said it will create a joint venture with Kazakhstan’s Altel to grab market share and monopolise access to 4G technology, a bold move in a region where corruption scandals have scarred rival Nordic companies.

Tele2 Kazakhstan is the third-largest operator in the country, after TeliaSonera’s Kcell and VimpelCom’s Beeline (Norwegian Telenor owns a 33% stake in VimpelCom). Altel is a subsidiary of Kazakhstan’s state-owned Kazakhtelecom and the only operator with a 4G licence in the country.

Tele2’s CEO, Alison Kirkby, said that the deal will give the company a major lift and position it to attract more customers.

“This transaction will enable our customers to gain access to Altel’s 4G network and to benefit from its accelerated rollout across Kazakhstan,” Ms Kirkby said of the joint venture.

In the past two months, TeliaSonera and Telenor have said they want to sell off their assets in Central Asia and the South Caucasus after US and Dutch authorities started investigations into corruption allegations in Uzbekistan. Tele2 have, possibly, spotted an opportunity and decided to push to form a joint venture with Altel.

But it will be tough, as price battles have pushed down profit margins in the telecoms sector in the past two years. In July, former Tele2 CEO Mats Granryd said: “Kazakhstan is turning into a real bloodbath when it comes to pricing.”

When the joint venture is formalised in 2016, Tele2 will own a 49% stake and will also be the company’s operator. Pietari Kivikko, Tele2 Kazakhstan’s chairman, will serve as the top manager in the new joint venture.

The depreciation of the tenge in August, after the Central Bank cut its US dollar peg, has hit profits at telecoms companies which earn tenge but accrue costs in foreign currencies.

This year, Tele2 Kazakhstan has fared better than the competition. In Q3, it increased its revenue by 34% compared to last year and in the first nine months of 2015, it increased its customer base by 33% to over 4m users.

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)