Category Archives: Uncategorised

Kazakhstan’s bail-out for savers to cost $420m

OCT. 7 2015, ALMATY (The Conway Bulletin) — A Kazakh government bail-out for hundreds of thousands of savers who hold tenge denominated deposits hit by a currency devaluation in August could cost the state around $420m, according to the Bulletin’s calculations.

The bail-out adds to the lengthening bill that the Kazakh state is having to foot to weather a worsening economic storm that has hit the Central Asia and South Caucasus region.

It has spent billions of dollars propping up its currency and also said that it will give handouts and tax breaks to key industries heavily effected by the economic downturn such as car-makers and smaller oil producers.

And in an effort to shore up support immediately after the devaluation on Aug. 20, President Nursultan Nazarbayev said savers would be compensated for losses incurred when the Central Bank ditched the tenge’s peg to the US dollar and allowed it to drop heavily.

Now, at a press conference in Almaty, Alexander Trentyev, director of the consumer protection department at the Central Bank, for the first time hinted at the bill that the government was facing.

“The compensation will cover the period August 18 2015 to September 30 2016. Over 1.7m accounts totalling around 250b tenge are eligible for the government aid,” media quoted him as saying.

The tenge is currently trading at around 275/$1, a drop of around 46% from its value of 188/$1 just before the devaluation on Aug. 20. This means that the 250b tenge in bank deposits will convert to 365b tenge and cost the government $420m in compensation. Of course, though, as analysts have said, the tenge could well drop further in value before Sept. 30.

But there is a flip-side for savers. Their accounts will be frozen for 13 months until Sept. 30 2016.

This measure appears to have been adopted to prevent customers from rushing to withdraw their savings and turning them into US dollars after they received compensation.

It will also keep a high level of tenge in the currency markets, a policy the Central Bank has said that it favours.

What the authorities are desperate to avoid during this period of economic turbulence is civil unrest. The bail-out of savers appears designed to ward this off.

ENDS

(News report from Issue No. 251, published on Oct. 9 2015)

Iran-Azerbaijan trade rises

OCT. 7 2015 (The Conway Bulletin) – Trade between Azerbaijan and Iran is growing, media quoted a senior official in its eastern province as saying, and it will continue to increase as Iran strengthens ties with Russia. Iran views Azerbaijan, increasingly, as a gateway to Russia.

ENDS

(News report from Issue No. 251, published on Oct. 9 2015)

US criticises Georgia

OCT. 7 2015 (The Conway Bulletin) – The US State Department said it was disturbed by reports that opposition TV channel Rustavi2 may be forced off the air after a court seized a stake in the company, cutting off access to funds that it said it needed to survive. The US has warned the Georgian Dream coalition government about eroding democracy and media freedom in Georgia.

ENDS

(News report from Issue No. 251, published on Oct. 9 2015)

Georgia’s CAA to improve domestic aviation

OCT. 6 2015 (The Conway Bulletin) – Georgia’s Civil Aviation Authority (GCAA) presented a plan to develop four airstrips, a move that it hopes will help boost domestic air travel. The GCAA said it was looking for partners to develop the sites which is said would thrive off Georgia’s growing economy and status as a tourist destination.

ENDS

(News report from Issue No. 251, published on Oct. 9 2015)

Japan to explore Kazakhstan

OCT. 5 2015 (The Conway Bulletin) — State-owned Japan Oil, Gas and Metals National Corporation said it will explore Kazakhstan for mineral deposits. Preliminary investigations will be conducted, jointly with Kazakhstan’s state-owned company Kazgeologiya, in 2016. Japan has bought large amounts of oil from Kazakhstan this year.

ENDS

(News report from Issue No. 251, published on Oct. 9 2015)

Lada builds new model in Kazakhstan

OCT. 7 2015 (The Conway Bulletin) — Russian carmaker AvtoVAZ will build two new models of its Lada brand in Kazakhstan starting in 2017. AvtoVAZ said its plant in Ust-Kamenogorsk, east Kazakhstan, will receive investments for around $840m.

ENDS

(News report from Issue No. 251, published on Oct. 9 2015)

Telenor wants out Uzbek market

OCT. 6 2015 (The Conway Bulletin) – Telenor, a Norwegian telecoms firm, said it is ready to sell its stake in Vimpelcom, a Russian company that also operates in Central Asia under the Beeline brand (Oct. 5). Vimpelcom is under investigation in the US and in the Netherlands for allegedly paying a bribe to enter the Uzbek market.

ENDS

(News report from Issue No. 251, published on Oct. 9 2015)

Business comment: Bailing out savers

OCT. 7 2015 (The Conway Bulletin) — Banks in Kazakhstan and Kyrgyzstan are bracing themselves for tough times ahead. The currency crisis that has hit the region has, it feels, still a long way to run. Central Banks in both countries have pledged to help commercial banks in the short term to prevent falls in the values of the tenge and som from spiraling into panic and a run on the banks.

This is sensible.

The Kazakh Central Bank said it would compensate savings accounts in tenge that have so far lost 46% in US dollar terms after the regulator moved to a free-float policy. Across the border, in Bishkek, the Central Bank laid out new measures to help customers pay their dollar- denominated mortgages, which have become more expensive as the som lost value.

When people lose confidence in their currency, as is happening across Central Asia and the South

Caucasus, Central Banks intervene. In both countries, new policies were adopted to limit the amount of loans in foreign currencies, to ensure stability in the market.

These short-term measures, however, may have serious repercussions down the road. Bailouts can have an adverse effect on these countries’ sovereign ratings and they could, in any case, be insufficient to reverse the economic downturn.

Let’s see how these policies fair against a falling currency market.

ENDS

(News report from Issue No. 251, published on Oct. 9 2015)

Russia sends attack helicopters to Tajikistan

OCT. 6 2015, DUSHANBE (The Conway Bulletin) — Russia said it will station attack helicopters at its base in Tajikistan, a strong sign the Kremlin believes the threat from the Taliban in Afghanistan to Central Asia is heightening.

A Russian Defence Ministry spokesman said Mi-24P gunships, heavily used during the Soviet Union’s war in Afghanistan in the 1980s, and Mi-8 MTV transport-combat helicopters will be stationed at the Ayni airbase, 30km outside Dushanbe.

Over the past week, the Taliban and US-backed forces belonging to the Afghan central government have been fighting for control of Kunduz on the Tajik-Afghan border. And this has worried Central Asian governments throughout the year.

A Dushanbe-based analyst who wished not to be named said: “The occupation of Kunduz by the Taliban has shaken Dushanbe. Tajik authorities know that they cannot handle any threat, be it domestic or external, without the help of Russia. For Rakhmon, the Kremlin is the guarantee of stability in Tajikistan.”

Tajik President Emmomli Rakhmon had been in Moscow the day before the Kremlin said it would send attack helicopters to Tajikistan.

And most people in Dushanbe welcomed Moscow’s help. Olim Shirinov, a Dushanbe resident, said: “Every new unit of Russian military equipment on Tajik soil is one more brick in the wall that guarantees stability in the country.”

ENDS

(News report from Issue No. 251, published on Oct. 9 2015)

Armenia approves new tax code

OCT. 6 2015 (The Conway Bulletin) – The Armenian government approved a second draft of a new tax code that it hopes will pull in extra revenue and cut its deficit. At its core, media reported that the tax code will target closing tax benefits.

ENDS

(News report from Issue No. 251, published on Oct. 9 2015)