MAY 5 2016 (The Conway Bulletin) – Georgia’s Central Bank intervened in the currency market for the sixth time in two months, in an effort to dampen the appreciation of its lari currency. The Central Bank bought $20m, injecting lari into the market. The intervention came as the lari reached 2.21/$1, its strongest rate since July 2015.
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(News report from Issue No. 279, published on May 6 2016)
MAY 5 2016, ALMATY (The Conway Bulletin) — Kazakhstan’s Central Bank cut its key interest rate by two percentage points to 15% because it said that inflation was slowing and the overall economic outlook was improving.
The consumer price index grew in April to an annualised rate of 16.3%, its highest since 2009, but the Central Bank said that the pace of inflation had slowed.
“Seasonally adjusted, annualised month-on-month inflation for each of the last three months was within the target range for the annual inflation set between 6% and 8%,” the Central Bank said in a statement linked to its rate change.
“A survey of households also showed that expectations of inflation have subsided as well.”
After months of poor economic data and a 50% devaluation of the tenge currency, any prognosis on Kazakhstan’s economy which is even vaguely positive will be seized upon and lauded. This is the first time in months that Kazakhstan’s Central Bank has shown confidence in its ability to control the money market, a sign that the worst period of a regional economic downturn might be over.
Still, the Central Bank did add a large dash of caution to its outlook.
It said that a potential downside risk to the economy was the “increased tenge-denominated high interest rate liabilities” held by commercial banks, which could put pressure on the financial sector. This is, essentially, a reference to bad loans.
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(News report from Issue No. 279, published on May 6 2016)
APRIL 29 2016 (The Conway Bulletin) – Georgia’s Central Bank sounded confident in its review of the country’s monetary policy, but looking at the data, the cheers are a bit more muted.
Yes, high interest rates have curbed inflation and stabilised the lari exchange rate — together with a few interventions in the currency market, that is — but economic activity and GDP growth have suffered.
The Central Bank has now hinted that the country needs to reach a new normal and said it will lower interest rates further in the next months.
Should Georgia be able to weather what analysts deem to be the last months of a two-year crisis, it could see growth pick up again in 2017.
The crucial issue, though, is how to boost the economy without pushing inflation too high.
Georgia is moving towards a more West-friendly economic environment, changing the tax code and giving incentives to foreign companies looking to set up shop in the country.
Both the IMF and the government now hope that their bet on the neo- liberal model will work.
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(Editorial from Issue No. 278, published on April 29 2016)
APRIL 5 2016, ALMATY (The Conway Bulletin) — Kazakhs have increased the amount of tenge they are keeping in bank accounts, suggesting that they now trust the currency once again despite it halving in value over the past seven months, Kazakhstan’s Central Bank said.
In February, Central Bank data showed that the amount of tenge saved in banks rose to 1.53 trillion tenge ($4.5b), up 5% from January. Significantly, too, the proportion of tenge as savings grew to 22% of the total, up from 20% in January.
Analysts said that two factors had contributed to this renewed confidence in the tenge. The first was that this year, the tenge has actually strengthened against the US dollar to around 340/$1 compared to an all- time low in mid-January of 390/$1.
In March, Kazakhstan’s Central Bank heavily intervened in the currency market, buying $1.2b on the Kazakh Stock Exchange, around 2.6 times more than it bought in February.
This, together with high liquidity ensured by capital held at the Single Pension Fund, helped to improve the tenge’s position, analysts said.
“The Central Bank now faces the problem of too much liquidity and too high interest rates,” Askar Akhmedov, senior analyst at Halyk Finance, part of one of the largest Kazakh banks, said in a report.
Secondly, analysts said the Central Bank’s policy of increasing interest rates on tenge savings in banks to 14% from 10%, in addition to dropping the interest paid on foreign currency savings to 2% from 3% was working.
On the streets of Almaty this more positive view of the tenge was, generally, reflected.
A pensioner said: “It is our national currency, and I trust it but the 50% drop in its value was unpleasant, especially for pensioners.”
Most people that the Bulletin’s correspondent in Almaty spoke to agreed, and it will be a relief to President Nursultan Nazarbayev and the Kazakh government that confidence in the tenge is returning after a torrid 2015.
There were some who took a more cautious approach, though.
“Nowadays the position of the tenge is unsteady and it may weaken again. If I had to choose between tenge and dollar to put money in deposit, I’d probably choose dollar,” said Aigerim, a music teacher.
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(News report from Issue No. 275, published on April 8 2016)
MARCH 30 2016 (The Conway Bulletin) – The Armenian Central Bank said it cut interest rates by a quarter of a percentage point to 8.25%, just over a month after the previous rate cut. The Bank said this is in line with the policy of easing the cost of borrowing and other monetary instruments. Economic activity in the country is shrinking and the Central Bank wants to boost it gradually by cutting rates.
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(News report from Issue No. 274, published on April 1 2016)
MARCH 29 2016 (The Conway Bulletin) – Kyrgyzstan’s Central Bank cut interest rates on Tuesday by two percentage points to 8%, in an effort to boost the domestic economy, official media said. At the beginning of March, Central Bank chief Tolkunbek Abdygulov had said interest rates would have remained steady at 10%.
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(News report from Issue No. 274, published on April 1 2016)
MARCH 30 2016 (The Conway Bulletin) – The Kyrgyz Central Bank continues to buy US dollars in the currency market because demand for foreign currency is shrinking and, the Bank’s chief Tolkunbek Abdygulov told a press conference, people and businesses need improved som liquidity. The Central Bank bought around $62m in March.
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(News report from Issue No. 274, published on April 1 2016)
MARCH 14 2016 (The Conway Bulletin) – Kazakhstan’s Central Bank left interest rates unchanged at 17% to give the tenge currency extra support. At its monthly policy-setting meeting, the Central Bank said that supporting the currency was a higher priority than reducing the cost of borrowing. Analysts had argued that the interest rate was set too high.
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(News report from Issue No. 272, published on March 18 2016)
MARCH 16 2016 (The Conway Bulletin) – Georgia’s Central Bank picked Koba Gvenetadze, a former IMF banker, to be its chief, replacing Giorgi Kadagidze whose term finished in February. The following day, President Giorgi Margvelashvili approved Mr Gvenetadze’s 7-year term at the Bank. Georgia’s economy has been under increased pressure from the falling value of the lari and rising inflation linked to a fall in oil prices and recession in Russia.
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(News report from Issue No. 272, published on March 18 2016)
MARCH 9 2016 (The Conway Bulletin) – Georgia’s Central Bank kept interest rates steady at 8%, saying that inflation was due to slow and dip into its target zone. Like the rest of the region, Georgia has been increasingly worried about inflation pressure building up in its economy. Prices and salaries have been rising as the value of the lari has fallen. Overall inflation in February was 5.6%.
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(News report from Issue No. 271, published on March 11 2016)