JAN. 19 2016 (The Conway Bulletin) — Ratings agency Fitch downgraded Kazkommertsbank’s long-term credit to CCC from B- because of a fall in the value of the tenge. Fitch said: “The downgrade reflects a significant increase in the volume of problem (mostly foreign currency-denominated) exposures, primarily as a result of the tenge’s devaluation.”
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(News report from Issue No. 264, published on Jan. 22 2016)
JAN. 12 2016, ALMATY (The Conway Bulletin) — Data from the Kazakh Central Bank showed that Foreign Direct Investment (FDI) into the country has collapsed to its lowest level for a decade.
In the first nine months of 2015, FDI into Kazakhstan measured $2.1b. Total FDI in 2014 was $8.3 and in 2010 was 10.4b.
The new data is yet more evidence of the sharp slowdown in the Kazakh economy, as well as the impact of the 50% fall in the value of the tenge.
Economists have forecast a slowdown in economic growth in Kazakhstan, expected to last into 2017 and 2018, linked to low oil prices and a recession in Russia.
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(News report from Issue No. 263, published on Jan. 15 2016)
JAN. 15 2016 (The Conway Bulletin) — In Azerbaijan, people took to the streets to protest against inflation and unemployment. The manat grew slightly to 1.58/$1, but what angers people most is the increase in prices, especially for imported goods.
In Kazakhstan, the tenge depreciated further to 366/$1, a 6% drop on the previous week. Many worry now that there could be no end to the downward spiral.
In Tajikistan, the somoni lost an additional 2% this week, trading at 7.38/$1. The currency slide in the country doesn’t seem to slow.
In Kyrgyzstan the Central Bank has kept the som stable at 75.9/$1 by intervening several times in the currency market. The Georgian Central Bank also protected the lari with a few interventions. In Azerbaijan and Turkmenistan, the governments imposed further restrictions on the trade of foreign currencies, by limiting licenses to banks, airports and, in Azerbaijan’s case, hotels.
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(News report from Issue No. 263, published on Jan. 15 2016)
JAN. 13 2016 (The Conway Bulletin) – Kazakhstan’s foreign and gold reserves fell to $27.2b at the end of December, their lowest level since August 2014, data from the Central Bank showed. Like other countries across the region, Kazakhstan has been propping up its tenge currency by selling its reserves. The tenge has halved in value over the past year.
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(News report from Issue No. 263, published on Jan. 15 2016)
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.
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(News report from Issue No. 262, published on Jan. 8 2016)
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.
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(News report from Issue No. 262, published on Jan. 8 2016)
JAN 6 2016 (The Conway Bulletin) – The proportion of cash in banks in Kazakhstan held in foreign currencies rose to 77.5% in November from 76.4% a month earlier, media reported quoting the Central Bank, highlighting people’s lack of confidence in the national currency. It has been a long-held Central Bank policy to try to persuade people to keep their savings in tenge. The tenge, though, lost around half its value in 2015.
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(News report from Issue No. 262, published on Jan. 8 2016)
JAN. 6 2016 (The Conway Bulletin) – The Tajik Central Bank imposed currency withdrawal restrictions on account holders as the Tajik somoni currency continued to lose value, media reported. It limited cash withdrawals to $400 per person. In December, the government closed down exchange kiosks, blaming them for pressuring the value of the somoni.
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(News report from Issue No. 262, published on Jan. 8 2016)
JAN. 7 2016 (The Conway Bulletin) — The New Year did not change the fortunes of currencies in the South Caucasus and Central Asia. All currencies are still suffering against a strong US dollar and Central Banks are intervening to prop them up.
Undoubtedly, the most notable decision came just before the holidays when Azerbaijan ditched its currency peg to the dollar and let the manat slide. After a 48% fall, the currency found its equilibrium at 1.55/$1. It is now trading at 1.57/$1.
In Kazakhstan, the tenge recovered towards the end of December, but it slid to 345/$1 in January.
Tajikistan witnessed the worst start of the year, with its somoni currency falling 2.5% in the first week of January, trading at 7.17/$1. Notably, exchange points have been charging a premium of 8-10% on currency transactions in the past few weeks.
In Kyrgyzstan the Central Bank has kept the som stable at 75.9/$1 by intervening several times.
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(News report from Issue No. 262, published on Jan. 8 2016)
JAN. 8 2016 (The Conway Bulletin) – Both Kazakhstan and Azerbaijan ditched their currencies’ peg to the US dollar in 2015, triggering sudden and sustained depreciation of their currencies.
These were tough, but necessary calls by their Central Banks as these currencies were over-valued compared to oil and the Russian rouble.
What happens next differentiates Azerbaijan and Kazakhstan.
Kazakhstan has allowed, with the odd intervention, its currency to devalue. The Azerbaijani Central Bank, by contrast and very much in keeping with the tight way that the country is run, appears determined to anchor the manat more-or-less at its current rate against the US dollar. The rhetoric may be of liberalisation but the actions are of a conservative and uptight Central Bank.
And this comes across in other ways too. A couple of weeks after the devaluation, Azerbaijan imposed a rule that only people presenting their official ID could change more than $500 into foreign currencies. This could be the first of many exchange controls.
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(Editorial from Issue No. 262, published on Jan. 8 2016)