Tag Archives: central bank

Azerbaijan manat drops 50% after peg is ditched

DEC. 21 2015 (The Conway Bulletin) – Azerbaijan’s Central Bank cut the manat from its US dollar peg just before Christmas, immediately triggering a 50% fall in its value.

This was, in effect, the second currency devaluation by Azerbaijan in 2015. The manat started 2016 trading at 1.56 /$1, 50% lower than it had been a year earlier.

Speaking a couple of days after the un-pegging of the manat, Azerbaijani president Ilham Aliyev said officials had had no choice but to effectively devalue the manat.

“The main reason for the change in the manat’s rate was a decline in oil price by three times. It means that the change was inevitable,” Reuters quoted him as saying.

This is a major climb down from an earlier position held by Mr Aliyev and the Central Bank. At the start of 2015 he told media that a devaluation was definitely not on the cards only to order a 33% cut in the value of the manat in Feb. 2015.

Since then , in the past 10 months, the Azerbaijani Central Bank has spent billions of dollars trying to defend the value of the manat despite analysts warning that a devaluation was needed. When Kazakhstan ditched its own peg to the US dollar in August, triggering a 40% drop in the value of the tenge, this second devaluation of the manat became an inevitability.

Azerbaijan has been particularly exposed to the drop in oil and gas prices — down to 11-year-lows. Oil and gas sales make up around 95% of its export revenue and 75% of total government revenues. To counter the sharp fall in prices, down by around 75% since July 2014, the Azerbaijani government has slashed spending on infrastructure and social projects.

Fitch, the ratings agency, said the devaluation was needed but that it would hurt the banking sector.

“The sharp exchange rate adjustment eases the oil shock’s fiscal impact by boosting the local-currency value of oil revenues and a floating currency should help stabilise reserves,” it said. “The devaluation will hurt the banking sector, which has large amounts of foreign- currency denominated loans.”

The government has imposed currency controls over foreign exchange transactions. It said that people wanting to exchange over $500 worth of manat now needed to present a formal ID.

ENDS

(News report from Issue No. 262, published on Jan. 8 2016)

Azerbaijan and Kazakhstan diversify investment strategies

ALMATY, JAN. 8 2016 (The Conway Bulletin) — Kazakhstan and Azerbaijan will diversify the investment portfolios of their Sovereign Wealth Funds in 2016 away from low yield bonds and currency holdings to high- risk equity and property investments.

Slow global economic growth has forced Sovereign Wealth Funds to ditch conservative investment strategies in search of higher yields and Kazakhstan and Azerbaijan are following a trend.

Bloomberg News quoted Berik Otemurat, director at the Kazakh Central Bank’s National Investment Corporation, as saying: “We’re sitting on a huge pile of cash and not making real returns. It’s especially urgent to address this, given the gloomy outlook for oil prices and reduced inflows into the National Fund.”

Azerbaijani officials have said that they want to increase the cap on real estate investment in its investment portfolio to 10% from 5%for 2016, as well as raising the cap for equity investment to 15% from 10%. SOFAZ, Azerbaijan’s oil fund, has been buying up high-profile property for the past couple of years and it started 2016 by buying a 19th century palazzo in Milan for 97m euro.

“In 2016, SOFAZ will be implementing investment policy, which makes it possible to get the maximum yield at low risk of capital loss,” SOFAZ said of its of strategy.

But Indra Overland, research professor at the Norwegian Institute of International Affairs, said Sovereign Wealth Funds follow market trends, rather than set them, which generates a risk that will buy at the top, rather than the bottom, of the market.

“This change is probably driven by a combination of desperation over low oil price, dissatisfaction with historically low returns on bonds and worries about the stability of financial markets, especially related to China,” Mr Overland said.

ENDS

(News report from Issue No. 262, published on Jan. 8 2016)

Kyrgyz CBank sells US dollars

JAN. 6 2016 (The Conway Bulletin) – The Kyrgyz Central Bank sold $9.1m to prop up its ailing currency, media reported, its first intervention in 2016. Like the other countries of Central Asia, Kyrgyzstan has sold millions of dollars of its reserves to support its som. In December, media reported that it had intervened 17 times to prop it up.

ENDS

(News report from Issue No. 262, published on Jan. 8 2016)

Armenia’s CBank cuts interest rates

DEC. 22 2015 (The Conway Bulletin) – Armenia’s Central Bank cut its key interest rate by one percentage point to 8.75%, its lowest level for 11 months, because of a slowdown in inflation. It said that annualised inflation for the 12-months to the end of November measured 0.6% compared to 1.3% a year earlier. Slow global economic growth and low commodity prices have stalled prices in Armenia.

ENDS

(News report from Issue No. 262, published on Jan. 8 2016)

Georgia hunts for new CBank chief

JAN. 6 2016 (The Conway Bulletin) – Georgia’s President Giorgi Margvelashvili has started searching for a successor to Giorgi Kadagidze who will complete his 7-year term as head of the Central Bank in February. Mr Margvelashvili’s nominee will have to be voted in by the Parliament before he or she can assume office.

ENDS

(News report from Issue No. 262, published on Jan. 8 2016)

Turkmen President criticises head of Central Bank

DEC. 8 2015 (The Conway Bulletin) -Turkmenistan’s President Kurbanguly Berdymukhamedov reprimanded the head of the Central Bank and the head of the Commodity Exchange Agency at a government meeting, the Trend news agency reported.

Although details of the dressing- down were thin, as expected from Turkmenistan, it does indicate that, perhaps, Mr Berdymukhamedov is feeling the economic strain.

There have been a number of reports coming out of Turkmenistan over the year that show the country’s economy is under pressure from a drop in energy prices, a recession in Russia and a fall in value of currencies across Emerging Markets. At the start of the year the Central Bank devalued the manat currency by 19%. Last month, dissident websites reported that currency controls had been imposed.

And now this.

Trend reported that Mr Berdymukhamedov had told Central Bank chief Merdan Annadurdiyev and the head of the commodities exchange, Amandurdi Ishanov, that their work had been substandard. The report didn’t give any specific examples.

Mr Berdymukhamedov is keen on giving ministers a public dressing down. These reprimands generally betray some of his thinking on the country’s development. By focusing on the Central Bank and the commodities exchange, Mr Berdymukhamedov is showing his frustration with the economy.

With the distinct lack of accurate economic data flowing out of Turkmenistan, this is important.

ENDS

(News report from Issue No. 260, published on Dec. 11 2015)

Kyrgyzstan CBank changes rules

DEC. 9 2015 (The Conway Bulletin) – Kyrgyzstan’s Central Bank changed the reserve requirements for its commercial banks to reflect the less stable state of the Kyrgyz som. It reduced the proportion of minimum reserves held in som by 4.5% to 4% of a bank’s total reserves and also increased the requirement to keep 12.5% of the bank’s cash in foreign currency, up 2.5%.

ENDS

(News report from Issue No. 260, published on Dec. 11 2015)

Georgia’s CBank talks of rate rise

DEC. 7 2015 (The Conway Bulletin) – Georgia’s Central Bank chief Giorgi Kadagidze hinted at another interest rate rise to control inflation. He said inflation would peak next year before dropping back. At the start of last month, Georgia’s Central Bank increased its key interest rate by 0.5% to 7.5% — it’s highest level since 2011.

ENDS

(News report from Issue No. 260, published on Dec. 11 2015)

Kazakh Central Bank skips meeting

DEC. 3 2015 (The Conway Bulletin) – Kazakhstan’s Central Bank cancelled its monthly monetary policy meeting for the second consecutive month, disappointing markets which were looking for guidance on future policy. The Central Bank said that money markets were too unstable for it to announce policy. Critics said it had lost control of the tenge.

ENDS

(News report from Issue No. 259, published on Dec. 4 2015)

Azerbaijan’s Central Bank reserves drop

DEC. 2 2015 (The Conway Bulletin) – In an effort to prop up its manat currency, Azerbaijan’s Central Bank said it has spent nearly 60% of its currency reserves. Azerbaijan’s Central Bank held $6.8b at the end of October, down from $13.8b on Jan. 1. Azerbaijan devalued the manat by a third in February but this hasn’t stopped the slide.

ENDS

(News report from Issue No. 259, published on Dec. 4 2015)