Tag Archives: central bank

Kazakhstan cuts interest rates as economy improves

Armenia’s C.Bank cuts interest rate

FEB. 14 2017 (The Conway Bulletin) — Armenia’s Central Bank cut its key interest rate yet again to 6% from 6.25%, hoping to give its economy a boost. Armenia has now slashed its interest rate from 10.5% in 2015. The Central Bank’s biggest worry is deflation. Annualised deflation in January measured 0.6%, the Central Bank said.

ENDS

(News report from Issue No. 317, published on Feb.17 2017)

Comment: Central Banks face mess of their own making, says Kilner

FEB. 17 2017 (The Conway Bulletin) — First came the oil price collapse, then remittance flows started stagnating and (some) currencies (think of the tenge and the Azerbaijani manat) halved. Now the debt mountain, or perhaps debt tsunami is a better description, looms large, threatening to drown the countries of Central Asia and the South Caucasus.

Kazakhstan is the latest to propose a major bailout of its banking sector. Finance minister Bakhyt Sultanov said on Feb. 13 that the government would potentially use $6.3b to prop up banks listing under the weight of bad loans. The Tajik government is in talks with the IMF to borrow cash to help prop up its banking sector and in Azerbaijan the government has been, as quietly as possible, buying up chunks of the biggest bank. It now owns more than 76% of the International Bank of Azerbaijan, allowing it to smooth out its debt crisis without attracting too much attention.

Ratings agencies and analysts have been warning of this denouement.

As long ago as December 2015, Standard & Poorsratings agency said: “Medium-term prospects for Kazakhstan’s banking system have deteriorated in 2015 due to lower oil prices, the economic slowdown (especially in non-extractive sectors) and the weaker tenge.”

And that prediction has been borne out.

The frustration is that we have been here before. In the Global Financial Crisis of 2008/9 bad debt built up in banks in Kazakhstan forcing the government to step in. It bought out BTA Bank, at the time one of the country’s biggest lenders, and a handful of smaller banks. It was expensive but staved off disaster and the Kazakh government pledged not to find itself in a similar position again.

The government finally offloaded BTA bank to pro-government businessmen in 2014/15 and proposed to impose rules and regulations that would require its banks to bulk up their capital and refrain from handing out loans, mainly mortgages, to people unworthy of them.

Clearly, the Kazakh Central Bank and other regulators across the region, have failed. Certainly they have not been helped by the sharp currency devaluation that made US dollar-denominated mortgages unserviceable.

Better macro-economic policies, tighter rules on lending and a more clear-headed approach to dealing with problems would surely have put the Central Banks in better positions than they now find themselves. Governments in the region are once again having to buy themselves out of trouble.

By James Kilner, Editor, The Conway Bulletin.

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(News report from Issue No. 317, published on Feb.17 2017)

Kazakh central banker wants to support banks

FEB. 3 2017 (The Conway Bulletin) — Kazakhstan’s Central Bank chief Daniyer Akishev said that he wanted to use state funds to prop up big banks that are listing under the pressure of an economic downturn linked to a drop in oil and gas prices and a recession in Russia. He told a government meeting that the Central Bank was going to evaluate the quality of the banks’ assets later this year.

ENDS

(News report from Issue No. 315, published on Feb. 3 2017)

Georgian Central Bank raises interest rates

TBILISI, JAN. 25 2017 (The Conway Bulletin) — Georgia increased its key interest rate by 0.25% to 6.75%, its highest level since September 2016, because it said that inflation was beginning to pick up again.

The data shows that consumer demand in Georgia is still weak, year- on-year prices rises in December were measured at 1.8%, but the Central Bank said that its forecasts showed inflation rising throughout the rest of the year.

“The monetary policy decision is based on the macroeconomic forecast, according to which while demand side pressure on prices is weak, inflation is expected to be above its target rate for the most of the 2017,” it said in a statement.

Georgia’s inflation target was 5% for 2016 and is 4% for 2017.

Georgia has cut taxes on reinvested company profit, pledged to invest an extra 600m lari ($225m) in infrastructure projects and cut a free- trade deal with China.

Also on Jan. 25, Bloomberg News published an interview with Georgian finance minister Dimitri Kumsishvili. He said that a blend of tax cuts and spending on infrastructure would help Georgia’s economy grow by more than the predicted 4%.

Last year, weighed down by a collapse in the value of its currency a recession in Russia and the poor economic condition of its neighbours Azerbaijan and Armenia, annual GDP growth in Georgia measured 2.7%.

Since June 2016, Georgia’s lari currency has lost 21% of its value. The Georgian Central Bank has largely refused to buckle to demands to spend wildly to support the lari’s value and Mr Kumsishvili was adamant that the best way to strengthen it was through the economy.

“Strengthening the economy is the answer for the lari rate, this is the main task,” he told Bloomberg.

ENDS

(News report from Issue No. 314, published on Jan. 27 2017)

Kazakh Central Bank keeps rates steady

JAN. 9 2017 (The Conway Bulletin) — Kazakhstan’s Central Bank held its key interest rate as 12% at its first monetary session of 2017 but hinted that cuts would come later in the year to boost economic activity. The challenge for the Kazakh Central Bank is to boost economic activity without undermining confidence in its tenge currency.

ENDS

(News report from Issue No. 312, published on Jan. 13 2017)

Armenia’s CB cuts interest rates

DEC. 27 2016 (The Conway Bulletin) — Armenia’s Central Bank cut the country’s key interest rate by 25 basis points to 6.25%, continuing to slash the cost of borrowing. Armenia’s interest rate measured 8.75% at the beginning of 2016 but was steadily cut to stimulate prices rises and economic growth.

ENDS

(News report from Issue No. 311, published on Jan. 6 2017)

Kazakh Central Bank pulls KazInvestBank licence

ALMATY, DEC. 27 2016 (The Conway Bulletin) — Kazakhstan’s Central Bank revoked the licence of KazInvestBank, triggering concern over the stability of the Kazakh banking sector.

The Central Bank tried to play down the implications of pulling KazInvestBank’s licence but analysts said the failure of Kazakhstan’s 20th largest bank may be symptomatic of structural problems across the sector.

And, ominously, only four days earlier, on Dec. 23, sources had told Bloomberg news agency that the Central Bank had given Kazkommertsbank, Kazakhstan’s biggest bank, a $1.5b loan to maintain its cashflow.

Ratings agencies have been warning for most of 2016 that Kazakhstan’s banks were increasingly exposed to an economic downturn that has wiped 50% off the value of the tenge, flattened economic growth and dented living standards.

Oleg Smolyakov, the Kazakh Central Bank’s deputy chairman, said that KazInvestBank had allowed bad debts to build up to around 80% of its total portfolio.

“Irregularities in internal credit risk management procedures allowed borrowers with unstable situations, for example with negative equity, to build up higher debt levels and losses,” he said in a statement issued by the Central Bank.

The decision to close the bank is also an embarrassment for Daniyer Akishev who, only six months ago, said that all Kazakh banks were stable and had passed a stress test.

KazInvestBank, which is linked closely to the Kazakh elite, has declined to comment.

The banking sector in Kazakhstan is still recovering from the impact of the 2008/9 Global Financial Crisis. In a matter of months, Kazakh banks had built up large chunks of bad debt. This sunk three large banks, forcing the government to step in and spend billions of dollars propping them up.

Since then the Central Bank has tried to impose checks on balances on the banking sector, but analysts have always doubted their worth.

But it’s not only the Kazakh banking sector that is under pressure. The Tajik government has announced a rescue plan for its biggest banks and in Azerbaijan a handful of smaller banks have gone bankrupt.

ENDS

(News report from Issue No. 311, published on Jan. 6 2017)

Stock market: Georgian lari

DEC. 23 2016 (The Conway Bulletin) — It’s been a rollercoaster and with all good rollercoasters after a hair-raising ride you end up where you started.

This, of course, is Georgia’s lari currency. While it hasn’t quite ended 2016 where it started, and there are a few more days to go, it has been quite a ride. The lari opened 2016 at 2.41/$. On Dec. 22, the lari was trading at 2.75/$, a slight improvement from a year-low of 2.81 on Dec. 21 after the Central Bank intervened to give its currency a bit of strength.

It’s been on the slide since June when it peaked at 2.12/$. That’s a drop of 32.5% in six months. Like I said, it’s been quite a ride.

Essentially, the lari’s problems are Emerging Market currency problems.

They have been hit by a strengthened US dollar, security wobbles and by sustained low oil prices. Chuck in the poor performance of the Russian economy and stagnant local economic growth and its easy to see why the lari has been hammered. Worse-then-expected economic data and the Georgian Central Bank’s slashing of interest rates to try to boost growth have also weighed against the it.

ENDS

(News report from Issue No. 310, published on Dec. 23 2016)f

Georgia’s Central Bank props up lari

DEC. 20 2016 (The Conway Bulletin) — Georgia’s Central Bank sold $40m to try to stem a drop in the value of the lari, its first currency intervention since Oct. 12. In the past three months, the lari has lost around 19% of its value against the US dollar, worsening an already difficult economic outlook. In 2016, Georgia has sold $280m. The Central Bank blamed a strengthening US dollar for the lari slide.

ENDS

(News report from Issue No. 310, published on Dec. 23 2016)