Tag Archives: currency

Kazakhstan raises interest rates to protect currency against the coronavirus

MARCH 26 (The Bulletin) — Faced with a collapse in the value of its tenge currency, the Kazakh Central Bank raised interest rates by 2.75 percentage points to 12% on March 9. It confirmed on March 16 that it was going to maintain this rate. 

On March 24, Kazakhstan also banned the export of all foodstuffs. Officials said that food was needed in Kazakhstan for now and that it could not afford to be exported. The government has also cut its economic outlook for 2020 partly, it needs to be stressed, because of the collapse of oil prices.

On March 17, the government also announced a series of tax cuts and cheap credit initiatives which it said would help business recover from the shock of the coronavirus. Retailers, restaurants, cinemas and other business forced to close because of lockdowns linked to curtailing the spread of the coronavirus will be exempt from property tax for a year. Banks have been told to defer loan repayments and the government will spend $750 million on infrastructure projects which will create 120,000 jobs.

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— This story was first published in issue 440 of the Central Asia & South Caucasus Bulletin

— Copyright the Central Asia & South Caucasus Bulletin 2020

Georgia sells US dollar reserves to prop up lari currency

MARCH 26 (The Bulletin) — In Georgia, the Central Bank sold $140m of its currency reserves to prop up its ailing currency and also released a statement which said that its economy would recover once it has come through the fallout of the coronavirus. 

All shops have been closed, other than pharmacies and food shops. As reported on page 5, Georgia’s important tourist industry is facing collapse. Estimates said that 9m people visited Georgia in 2019, double the number from 2012.

The government has not yet downgraded its GDP growth estimates for 2020 but analysts said they expected this to happen within the next few days.

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— This story was first published in issue 440 of the Central Asia & South Caucasus Bulletin

— Copyright the Central Asia & South Caucasus Bulletin 2020

Markets: LAri pushes up to highest level since August

DEC. 9 (The Bulletin) –The Georgian lari pushed up 2% to its highest level since mid-August, propped up by the Central Bank which sold $20m at the end of November. The Georgian Central Bank has been under pressure to intervene to stop the slide of the lari, which has fallen by around 9% this year. It now trades at 2.9225/$1. It started the year at 2.6651/$1.

The region’s other currencies were steady, including the Kazakh tenge. Its Central Bank left interest rates at 9.25%, saying that it needed to keep them relatively high in order to fight off inflation which it warned could be a problem. It is currently around 5.5% but could hit 6% in 2020, the Central Bank said.

Kazakhstan’s Central Bank also said that a widening current account deficit was also restricting its room for manoeuvre. It said that the deficit would widen to 3.1% of GDP next year from 2.2% this year.

The tenge was unmoved at 386.1/$1 but is still down from 381/$1 at the start of the year.
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— This story was first published in issue 431 of the weekly Bulletin on Dec. 9 2019

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Markets: Currencies steady after downward pressure

NOV. 27 (The Bulletin) — After a couple of months of sustained downward pressure that pushed currencies to some of their lowest levels, markets have slowed and steadied. Most currencies failed to shift significantly over the past week, with the exception of the Kazakh tenge which strengthened by 0.7%. It has pulled back from near an all-time low of 389/$1 and is now valued at 386.4/$1.

On the Central Bank news front, the Trend news agency has been reporting that the Uzbek Central Bank is considering lowering interest rates next year to give borrowing and spending a lift. It is held back by rising inflation, though, with analysts estimating that the real inflation rate if around 14 – 16%.

In Bishkek, the Central Bank said that it was going to keep its key interest rate steady because inflation had finally started to pick up. It said that inflation measured 2.5% in mid-November and would rise to 3.5% by the end of the year. It has an inflation target of 5-7%.

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— This story was first published in issue 430 of the weekly Bulletin.

Uzbekistan says it may start cutting interest rates

NOV. 26 (The Bulletin) — Uzbek Central Bank chief Mamarizo Nurmuratov said that he may start cutting interest rates from next year as it focuses its attention on trying to beat inflation. Uzbekistan last changed its key interest rate in 2018 when it moved it to 16% from 14%. This month the Central Bank has been handed more power and told to focus on dampening inflation which it expects to hit 13% next year.
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— This story was first published in issue 430 of the weekly Bulletin.

CURRENCIES: Lari drops to lowest rate for five years

The biggest mover this week was the Georgian lari which fell by half a percentage point to 2.9591/$1, its lowest rate against the US dollar for at least five years.

Analysts said that the drop in lari value was linked to concern about rising inflation that has undermined strong economic growth this year.

Economists also expect the region’s other big currency, the Kazakh tenge, to fall. In a Reuters poll of seven analysts, four said that the tenge would fall further this year. All seven said that it would be trading at a lower value in 12 months time than it does currently.

They said that a government budget gap between spending and income was a concern. Reuters reported that the government deficit was 813b tenge ($2.1b) on Oct. 1, triple the deficit of one year earlier. This has weighed on the performance of the tenge this year which has fallen from 380.96/$1 to nearly 389/$1.

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— This story was first published in issue 428 of the weekly Bulletin.

Kazakhstan to bail out Tsesnabank

ALMATY/Jan. 29 (The Conway Bulletin) — — The Kazakh government will bail out Tsesnabank, the country’s second-largest bank, for the second time in six months, once again highlighting the fragility of Kazakhstan’s financial system.

The $1.6b bailout prompted an outburst from President Nursultan Nazarbayev that finance officials and the Central Bank were “cowards” and were not doing enough to protect the system from conflicts of interests and poor bank owners.

“You are just cowards, not cabinet ministers!” Reuters quoted Mr Nazarbayev telling cabinet ministers and Central Bank officials at a meeting. “Are your hands and knees shaking too much to make a decision? What are you doing here then?”

Mr Nazarbayev is particularly sensitive about the strength of Kazakhstan’s banks. He ordered the Central Bank to tighten up its regulations of the banks after the 2008/9 Global Financial Crisis, when the Kazakh government had to buy a handful of bankrupt banks, but an economic downturn in 2014/17 showed up the sector’s continued weakness.

Some banks did prove resilient in the downturn, but the government was still forced to bail out some the more heavily-indebted larger banks and also allow a handful of smaller banks to go bankrupt.

This has hit the government’s resources, dented its wider image for financial competence and worried ordinary people who have drawn down their bank deposits.
Tsesnabank, which is owned by Adilbek Zhaksybekov, received a $1.2b bailout in September. Mr Zhaksybekov is a close confidant of Mr Nazarbayev and his former Chief-of-Staff.

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>This story was first published in issue 398 of The Conway Bulletin on Jan. 31 2019
Copyright The Conway Bulletin 2019

CURRENCY MARKETS: Kyrgyz som hits highest level since June 2017

FEB. 6 (The Conway Bulletin) – Support from the Central Bank pushed the Kyrgyz som up to 68.4/$1 from 69.31/$1, its biggest single-day leap since April 2017. It has come off slightly since then but the som is still trading at around an eight month high.

Analysts said that there were no fundamental reason why the som should jump in value and instead said that the move was likely down to quiet support from the Central Bank. The Kyrgyz Central Bank has a reputation for intervening to support the som if it looks to be dropping too low.

In November and December, the som had been flirting at lows not seen since the start of 2016 when oil was below $30/barrel and Russia’s economy, the driver for Central Asia, had been in recession.

Aside from the Kyrgyz som, most of the currencies shifted down a couple of ticks, while the Georgian lari, breaking its bull-run, stayed level.

With oil and the rest of the global commodities coming off highs, it is likely that there will be some reverses over the next few weeks.

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>>This story was first published in issue 360 of The Conway Bulletin

Azerbaijani Central Bank says inflation to be 6-8% in 2018

DEC. 29 (The Conway Bulletin) — Inflation in Azerbaijan should measure between 6% and 8% in 2018, the Central Bank said. In the past couple of years, inflation in Azerbaijan has been measured in the double digits as the economy fights a sharp economic downturn and a currency devaluation that wiped 50% off the value of the manat in 2015/16.

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— This story was first published on Jan. 5 2018 in issue 356 of The Conway Bulletin

Currency market: Lari falls but finishes 2017 up

JAN. 5 (The Conway Bulletin) — The Georgian lari yo-yoing showed no sign of stopping as it came off recent highs to fall 1.2% in the period from Dec. 22. On Dec. 22, the Georgian lari had been valued at 2.534/$1 compared to its current value of 2.589/1. It finished the year at 6.6% higher than its 2017 starting value.

The other big mover over the Christmas period was the Kyrgyz som. It rose 1.2% to 68.93/$1 and finished the year nearly 0.5% stronger against the US dollar.

Indeed only two currencies out of the eight in the Central Asia and the South Caucasus region were weaker on New Years eve 2017 then they were on the first trading day of the year.

The Uzbek authorities effectively devalued their soum currency in September when they released it from its various US dollar pegs. It immediately lost half its value to trade at around 8,100/$1 and has stayed there ever since.

The other losing currency of 2017 was the Tajik somoni. Pushed down by bad fundamentals and a failing banking system it finished the year 12% lower at 8.8277/$1.

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— This story was first published on Jan. 5 2018 in issue 356 of The Conway Bulletin