OCT. 13 2015 (The Conway Bulletin) – Azerbaijan is considering following Kazakhstan and allowing its manat currency to float free, the head of the Central Bank Elman Rustamov said to media, effectively warning of a another devaluation. Azerbaijan devalued its currency by 33% in February but has still had to spend billions defending its value since then.
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(News report from Issue No. 253, published on Oct.16 2015)
OCT. 3 2015 (The Conway Bulletin) – The IMF said that rising inflation in Azerbaijan was a growing risk and the Central Bank said that its currency reserves had fallen to their lowest level for nearly four years, more data that points to a worsening outlook for the Azerbaijani economy.
In its World Economic Outlook, the IMF said that inflation would measure 5% this year in Azerbaijan, a reflection of the pressure prices have been under since February when the Central Bank devalued its manat currency by 33%.
And so are the Central Bank’s declining currency reserves.
These have fallen to just over $7b at the end of September from $7.3b in August, its lowest level since November 2011 when it was recovering from the 2008/9 Global Financial Crisis.
It’s been a steep, fast fall. At the end of 2014, Azerbaijan’s currency reserves were nearly double at $13.7b.
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(News report from Issue No. 251, published on Oct. 9 2015)
OCT. 7 2015, ALMATY (The Conway Bulletin) — A Kazakh government bail-out for hundreds of thousands of savers who hold tenge denominated deposits hit by a currency devaluation in August could cost the state around $420m, according to the Bulletin’s calculations.
The bail-out adds to the lengthening bill that the Kazakh state is having to foot to weather a worsening economic storm that has hit the Central Asia and South Caucasus region.
It has spent billions of dollars propping up its currency and also said that it will give handouts and tax breaks to key industries heavily effected by the economic downturn such as car-makers and smaller oil producers.
And in an effort to shore up support immediately after the devaluation on Aug. 20, President Nursultan Nazarbayev said savers would be compensated for losses incurred when the Central Bank ditched the tenge’s peg to the US dollar and allowed it to drop heavily.
Now, at a press conference in Almaty, Alexander Trentyev, director of the consumer protection department at the Central Bank, for the first time hinted at the bill that the government was facing.
“The compensation will cover the period August 18 2015 to September 30 2016. Over 1.7m accounts totalling around 250b tenge are eligible for the government aid,” media quoted him as saying.
The tenge is currently trading at around 275/$1, a drop of around 46% from its value of 188/$1 just before the devaluation on Aug. 20. This means that the 250b tenge in bank deposits will convert to 365b tenge and cost the government $420m in compensation. Of course, though, as analysts have said, the tenge could well drop further in value before Sept. 30.
But there is a flip-side for savers. Their accounts will be frozen for 13 months until Sept. 30 2016.
This measure appears to have been adopted to prevent customers from rushing to withdraw their savings and turning them into US dollars after they received compensation.
It will also keep a high level of tenge in the currency markets, a policy the Central Bank has said that it favours.
What the authorities are desperate to avoid during this period of economic turbulence is civil unrest. The bail-out of savers appears designed to ward this off.
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(News report from Issue No. 251, published on Oct. 9 2015)
OCT. 2-8 2015 (The Conway Bulletin) — The Kazakh tenge lost 1.5% of its value over the past week, ending at 274/$1.
Much of this perceived strength appears to lie with the Central Bank’s little secret — intervention. Despite promising never to intervene in the currency again, the Kazakh Central Bank has spent another $367.5m this week propping up its currency.
Over the border in Kyrgyzstan, the som crept briefly over 69/$1 on Oct. 6, before settling back to 68.9 in a week that saw little of the violent fluctuations of previous episodes. The Kyrgyz Central Bank also intervened in the market, selling $10.2m.
No doubt the successful and peace- ful parliamentary elections would have played well to the steady currency markets. European vote monitors were certainly impressed and that is good for Kyrgyzstan’s image.
The Georgian lari was also stable last week at 2.40. Positive economic data and a substantial stability in foreign reserves reassured lari holders.
The Tajik somoni continued its gradual devaluation against the dollar. By marginally weakening every week, the somoni has lost 2.5% of its value against the dollar over the past month.
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(News report from Issue No. 251, published on Oct. 9 2015)
OCT. 6 2015 (The Conway Bulletin) – The proportion of savings in Kazakhstan held in foreign currency measured 78% in August, according to the ranking.kz website, a sharp increase from a year earlier. Foreign currency deposits in August 2014 measured 60% of the total. Kazakh savers have gradually lost faith in their currency.
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(News report from Issue No. 251, published on Oct. 9 2015)
OCT. 6 2015 (The Conway Bulletin) – Piling more pressure on the Kazakh Central Bank, Vijay Mahadevan, CEO of steel maker ArcelorMittal Temirtau, said its decision to cut the tenge free from its US dollar peg in August was a good one but that it needed to devalue further. Mr Mahadevan said the tenge was overpriced against the rouble.
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(News report from Issue No. 251, published on Oct. 9 2015)
OCT. 6 2015 (The Conway Bulletin) – Car imports to Azerbaijan halved in the first eight months of the year, the Azerbaijani statistics committee said. It said in Jan-Aug, Azerbaijan imported 21,147 cars, down from 39,198 in the same period in 2014. Azerbaijan’s currency has devalued this year and new regulations mean imported cars have to take a higher grade of petrol than previously, making it harder to import older cars.
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(News report from Issue No. 251, published on Oct. 9 2015)
ALMATY, OCT. 2 2015 (The Conway Bulletin) — Kazakhstan’s Central Bank raised its new key interest rate to 16% from 12% in an attempt to contain rising inflation.
The increase in the overnight repo rate, made the key interest rate in September, highlights how heavily the Central Bank underestimated the rate that inflation would rise after a devaluation of its tenge currency in August. The tenge is now trading at 272/$1 compared to 188/$1 before it was cut from its US dollar peg on Aug, 20.
“Considering the economic data and prospects for growth the National Bank decided to raise its key interest rate to 16% to keep inflation in the medium-term target range of 6-8%,” the Central Bank said in a statement.
But bolstering the strength of the tenge may have been the Kazakh Central Bank’s main objective for the interest rate rise. Despite promising not to intervene in the currency markets after ditching the US dollar peg, the Kazakh Central Bank has spent $1b propping up its currency and keeping it away from the 300/$1 floor that it has threatened to fall through.
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(News report from Issue No. 250, published on Oct. 2 2015)
OCT. 1 2015, ALMATY (The Conway Bulletin) — The collapse in the value of the Kazakh tenge over the past 18 months has not only hurt businesses and consumers in Kazakhstan. Charities that collect cash in tenge but accrue costs in US dollars and other foreign currencies are also having to cut services — often life-saving ones.
In an interview with The Conway Bulletin, Ilyas Kubriyanov, head of the UnityKZ charity, said that the cost of sending ill children abroad for treatment had spiralled.
“We are having problems, of course, as foreign hospitals invoice in dollars but we collect 90% of our donations in tenge,” he said. “Consequently, the cost of treatments is increasing.”
UnityKZ helps pay for children who have cancer or other serious illnesses to travel abroad for treatment. Mr Kubriyanov, who set up the charity in 2009, said that there are currently 10 children waiting for treatment.
“Because of the currency situation, the money we collect loses its impact,” he said. “Everything has become much more expensive.”
The Kazakh Central Bank released the tenge from its US dollar peg in August, triggering a sharp devaluation. It is trading at around 272/$1 compared to 188/$1 on Aug. 19.
It also devalued its currency in February 2014. The tenge is now worth nearly half its Feb. 2014 value.
A sharp drop in oil prices and a recession in Russia has battered economies in Central Asia and the South Caucasus. Statistics show unemployment and inflation rising but the impact is felt across Kazakh society.
“Recently, we asked parents of sick children to think about another type of treatment to have or another country to aim for,” Mr Kubriyanov said. “One child was transferred to China recently, but they also have some difficulties with their currency there.”
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(News report from Issue No. 250, published on Oct. 2 2015)
SEPT. 29 2015 (The Conway Bulletin) – Currency reserves held by Armenia’s Central Bank have dropped to $1.646b from $1.703b at the start of the month, despite it insisting that it was not intervening in the currency market to support the dram. A year earlier, the CBank’s currency reserves measures $1.75b.
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(News report from Issue No. 250, published on Oct. 2 2015)