Tag Archives: currency

EBRD to help Armenia develop currency markets

MARCH 15 2016 (The Conway Bulletin) – The European Bank for Reconstruction and Development (EBRD), one of the biggest investors in the former Soviet region, signed a deal with Armenia’s Central Bank to help it develop dram-listed capital markets, to improve Armenia’s image as a reliable financial market.

The agreement is part of EBRD’s Local Currency Programme (LCP), which is also aimed at Georgia, Kyrgyzstan and Tajikistan.

“The EBRD provides local currency loans through procuring local currency funding or hedging, by entering into currency swaps with third party providers, such as the Currency Exchange Fund,” the EBRD said in a statement.

It’s been one of the EBRD’s stated aims to develop markets and financial tools which support local tools and reduce the dollarisation of economies.

“Expanding the availability of local currency financing is crucial for the growth of local businesses by providing them with fund at affordable rates and manageable risk,” Andre Kuusvek, EBRD director at the LCP said in a statement.

Strengthening and protecting local currencies has become especially important after the drop in oil prices globally exposed their vulnerabilities.

ENDS

(News report from Issue No. 272, published on March 18 2016)

Business comment:

MARCH 11 2016 (The Conway Bulletin) – Kazakhstan is AvtoVAZ’s largest export market but a duty introduced at the start of the year by the Kazakh government to support its car making industry, has, apparently, destroyed it.

The number of AvtoVAZ cars delivered to the country jumped in 2015 due to the tenge-rouble currency imbalance for the first part of the year.

From the end of 2014 the rouble started collapsing, but the Kazakh Central Bank stubbornly kept the tenge at 185/$1.

This made imports very cheap, undermining Kazakhstan’s own carmaking industry but boosting AvtoVAZ.

In the first half of 2015, car sales were down by one-third. For the year, sales were down 40% to 97,446 units, the lowest level since 2012.

Even President Nursultan Nazarbayev weighed in and said that it was wrong for Kazakhs to buy cheaper products abroad and push the domestic industry out of the competition.

The Kazakh government also looked into subsidising the local automotive sector and impose import duties — an issue that must surely have raised concerns for both the World Trade Organisation and the Eurasian Economic Union.

The new $2,000 car import tax has also had an almost immediate effect. It has made imports unsustainable. It has simply priced them out of the market, denting consumer choice and, also, Kazakh- Russian relations.

Kazakhstan and Russia are supposed to be allies. The Eurasian Economic Union, a Kremlin project, was supposed to protect the area from interventionist duties. Where was it when Kazakhstan said it was going to impose its $2,000 import levy on car imports.

ENDS

(News report from Issue No. 271, published on March 11 2016)

Kazakh CBank introduces new rules

FEB. 29 2016 (The Conway Bulletin) – Kazakhstan’s Central Bank imposed new rules for exchanging tenge into US dollars in an effort to bolster its tenge currency, which has lost around half its value in the past 12 months. From now, Kazakhs will have to present photo ID if they want to exchange more than 1m tenge ($2,860) into any foreign currency. This is half the previous level.

ENDS

(News report from Issue No. 270, published on March 4 2016)

Azerbaijan drops currency tax

FEB. 23 2016 (The Conway Bulletin) – The Azerbaijani parliament formally dropped a plan to impose a 20% tax on all deals in foreign currencies. It voted to drop the bill, which had passed earlier in the year, after President Ilham Aliyev refused to sign it. The motive for the bill had been to protect Azerbaijan’s manat currency which has lost around half its value but critics said it was unfair and unworkable. Low oil prices have hit Azerbaijan hard. It is reliant on oil to earn export revenue.

ENDS

(News report from Issue No. 269, published on Feb. 26 2016)

Kazakhstan slips towards recession

FEB. 23 2016, ALMATY/DUSHANBE (The Conway Bulletin) — Kazakhstan verged on acknowledging that its economy may actually shrink this year and a Tajik Central Bank official said it was in talks with the IMF for an emergency loan, more signals that a sharp regional economic crisis was deepening further.

Normally bullish about its own GDP growth predictions, the reconfigured Kazakh government GDP growth estimate of 0.5% is an important sign of the severity of the economic downturn linked to low oil prices. Kazakhstan had earlier predicted GDP growth in 2016 at 2.1%.

“If the cost of a barrel of oil is $40, GDP growth will be 2.1%, but we’ve taken the conservative approach and have assumed that the price of oil will costs $30 per barrel and that GDP growth will hit 0.5%,” journalists quoted Yerbolat Dosayev, the economy minister as saying. Oil is currently around $35/barrel.

Importantly, this new GDP growth estimate is far closer to that of international economist who have said that Kazakhstan’s economy could shrink in 2016. The last time that Kazakhstan’s economy dipped into a recession was in 2008.

Low oil prices and a recession in Russia which has wiped out essential remittance and business investment flows have hit Central Asia hard. The scale and speed of the downturn appears to have wrong-footed leaders, including Kazakh president Nursultan Nazarbayev and his advisers.

They have slashed government budgets and also sold off chunks of state-owned companies, but they haven’t been able to prevent the tenge from losing 50% of its value and inflation rising. Officials are now worried about anti-government protests.

On the southern fringe of Central Asia, Tajikistan, the world’s most remittance-reliant economy, has also been reeling from the impact of the downturn. It has called in the IMF to try to organise an emergency loan.

Jamoliddin Nuraliev, deputy head of Tajikistan’s Central Bank, told the FT that talks with the IMF had begun.

“It’s crisis time,” he said.

Tajikistan has depleted its currency reserves in its Central Bank trying to defend the value of it somoni currency. At the same time, data has shown that the flow of remittances from Russia have dropped by around half.

ENDS

(News report from Issue No. 269, published on Feb. 26 2016)

Azerbaijan’s CBank increases rates

FEB. 15 2016 (The Conway Bulletin) – Azerbaijan’s Central Bank raised its key interest rate for the first time since 2011 to try to bolster its ailing currency. It raised its key interest rate to 5% from 3%. The manat has lost 50% of its value over the past year as oil prices fall. Oil is Azerbaijan’s key export.

ENDS

(News report from Issue No. 268, published on Feb. 19 2016)

Inflation jumps in Azerbaijan

FEB. 10 2016 (The Conway Bulletin) – Prices in Azerbaijan jumped by 5.8% in January compared to December, according to the national statistics committee. The statistics committee said food prices rose 8.7% last month. In December the Central Bank allowed the manat currency to float free against the US dollar. This triggered a 35% devaluation in its value, putting prices under enormous pressure to rise.

ENDS

(News report from Issue No. 267, published on Feb. 12 2016)

Kyrgyzstan bans dollar mortgage

FEB. 10 2016 (The Conway Bulletin) – Kyrgyzstan’s Central Bank said that it had banned commercial banks from handing out US dollar mortgages to customers. The ban is designed to stop the economy from accruing more bad debt. Like its neighbours the Kyrgyz som has been under increased pressure to devalue. Over the past couple of months, the Central Bank has intervened heavily in the currency markets to protect its value but analysts have said that this policy is unsustainable and a devaluation is inevitable.

ENDS

(News report from Issue No. 267, published on Feb. 12 2016)

Azerbaijan’s President dismisses tax code

FEB. 10 2016 (The Conway Bulletin) – Azerbaijani President Ilham Aliyev refused to sign into law a bill that would have imposed a 20% tax on all foreign currency investments, media reported, an apparent U-turn on a much-heralded government strategy unveiled last month to head off a worsening currency crisis. Azerbaijan’s currency lost around half its value in 2015 and the Central Bank has been under pressure to stop businesses cashing out of manat into other currencies. By refusing to sign the bill, though, Mr Aliyev is effectively saying that law- makers and the Central Bank have to re-think their policies.

ENDS

(News report from Issue No. 267, published on Feb. 12 2016)

Kyrgyzstan imposes fines for USD

FEB. 3 2016 (The Conway Bulletin) – Kyrgyzstan’s anti-monopoly said it would start to impose fines against shops, companies and people selling products in US dollars rather than the local som currency. The new rules appear designed to boost the use and the strength of the Kyrgyz som. The som has lost around a third of its value.

ENDS

(News report from Issue No. 266, published on Feb. 5 2016)