DEC. 22 2014, (The Conway Bulletin) — In a televised address, Kazakh president Nursultan Nazarbayev said he had a plan to counter falling oil prices even if they fell below $40/barrel. Oil prices have now halved from their height last summer to around $50/barrel. Kazakhstan has been building up a reserve of cash to deal with a slump.
ENDS
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(News report from Issue No. 213, published on Jan. 7 2015)
DEC. 5 2014 (The Conway Bulletin) – The Georgian lari and the Armenian dram have fallen sharply against the US dollar. The lari hit its lowest level for 10 years and the dram its lowest level since 2006. The root cause of the collapse of the currencies is the weakening of Russia’s economy because of a collapse in oil prices and Western- imposed sanctions.
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(News report from Issue No. 212, published on Dec. 10 2014)
NOV. 28 2014 (The Conway Bulletin) – The depreciation of the Russian rouble has hit Kazakhstan’s energy sector, media reported.
Kazakh media said Samruk-Energo, the state-owned energy company, had cancelled rouble-denominated contracts with Russian clients.
“We have suspended power supplies over the lingering Russia’s currency devaluation. Supplies are no longer economically viable for Kazakhstan-based power plants. Loss of the markets is an important issue,” media quoted Almasadam Satkaliyev, head of Samruk-Energo, as saying.
This is important as it shows how Kazakh industry is beginning to lose out from a depreciating rouble. It’s an issue that could threaten to upset otherwise close relations between the two neighbours.
Kazakhstan has signed up to the Russia-led Eurasian Economic Union and has a host of other friendly treaties in place.
The problem is that the Kazakh Central Bank has pledged not to devalue its currency after knocking 20% off its value earlier this year. This means that Kazakhstan will have to look elsewhere to sell its power or accept a vastly reduced price.
Mr Satkaliyev also said that Kazakhstan was looking to replace coal supply contracts with Russian clients.
“Russia’s economy is not ready to import Kazakhstan’s coals at higher prices. Russia has adopted a program to replace Kazakhstan’s coal,” he said.
“A second factor is the continuing devaluation of the Russian rouble. All the contracts rely on the Russian rouble; therefore for the Kazakh side it is of great importance to ensure economic viability of supplies.”
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(News report from Issue No. 211, published on Dec. 3 2014)
DEC. 2 2014 (The Conway Bulletin) – Kazakhstan’s gold and foreign currency reserves have grown by 15.8% this year, media reported quoting the Central Bank’s press service. This war-chest is important because the Central Bank has said it is prepared to spend to defend the tenge currency against falling oil prices and a drop in the Russian rouble.
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(News report from Issue No. 211, published on Dec. 3 2014)
NOV. 24 2014 (The Conway Bulletin) – Armenia’s Central Bank said it was prepared to spend millions of dollars propping up its currency, the dram, despite increased pressure to devalue.
Like other currencies across the South Caucasus and Central Asia region, falling oil prices and a devaluation in Russian rouble are pressuring the dram.
On Monday, Nov. 24, the dram was trading at 435 to $1, down 4% from Friday.
“The Central Bank reserves are enough to prevent any artificial fluctuations of the rate and secure financial stability,” the Central Bank said in a statement.
Perhaps but the warning signs are increasing and even the Central Bank’s statement smacks of desperation.
In the last three weeks, Reuters reported, the Armenian Central Bank has spent over $60m defending its currency.
Armenia is tied into Russia, politically, economically and emotionally. It has agreed to join the Kremlin’s Eurasian Economic Union in January and Russian business virtually runs the economy.
With oil prices and the rouble falling further it can only be a matter of time before currencies such as the dram also tumble again.
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(News report from Issue No. 210, published on Nov. 26 2014)
NOV. 15 2014 (The Conway Bulletin) – The Tajik somoni currency has fallen by 7% against the US dollar this year and 2% in the last week, mainly due to the falling value of the Russian rouble, threatening its economic stability. Remittances from Russia account for around half of Tajikistan’s GDP.
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(News report from Issue No. 209, published on Nov.19 2014)
NOV. 12 2014 (The Conway Bulletin) – The Uzbek sum currency has fallen to its lowest levels against the US dollar in independent Uzbekistan’s 23 year history, pushing up the price of food and threatening social stability.
On the Black Market, an essential measure of currency rates, the exchange rate in Tashkent hit the 3,450 sums to $1. The skyrocketing currency price is a mirror of Russia’s economic troubles.
A Tashkent resident told the Conway Bulletin that a kilogram of mutton now costs between 25,000 and 30,000 sums, compared to 20,000 sums in the summer.
Prices of bread, sugar and grain-based cereals have also risen by roughly 25% over the past three months, he said.
“As if the recent increase in utility costs was not frustrating enough, the government’s inaction to stem price increases because of a foreign currency adds insult to injury,” the source said.
The Tashkent resident was referring to a 10% increase imposed by the government on utility prices on Oct. 1.
This insight is important because it provides a first- hand snapshot of how frustration is building in Uzbekistan over food price increases and the rising cost of utilities.
Ordinary Uzbeks have also had to put up with fuel and gas shortages. Social pressure is building.
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(News report from Issue No. 209, published on Nov.19 2014)
NOV. 19 2014 (The Conway Bulletin) – In Kazakhstan, November 15 is the Day of the National Currency, a little-known holiday for workers in the financial sector.
With the Kazakh tenge under pressure again despite a 20% devaluation earlier this year, they and the national currency will be grateful for the rest.
The tenge was born in 1993, after Kazakhstan’s independence from the Soviet Union.
It had a bumpy ride with initial inflation, matching concerns about the viability of an independent Kazakhstan. The exchange rate against the dollar jumped from an initial 4.75 to 35 within two months.
A dollar peg provided some stability — even if it was shaky — for the tenge during the second half of the 1990s but the Russian and Asian crises forced a new market- driven devaluation. Between April and September 1999, the tenge lost one third of its value against the greenback.
A corner, though, was turned at the start of the 21st century and with Kazakhstan maturing as a country so did its currency. Fiscal responsibility helped keep down inflation in the early 2000s, oil prices slowly rose, giving Kazakhstan’s fledging energy sector a boost.
Then came two devaluations of 20%. The first in Feb. 2009 and the second five years later.
With the US Federal Reserve easing its policy of cheap money and preparing to raise interest rates, pressure on emerging currencies, including the tenge, is likely to increase.
Aged 21, the tenge has already had an eventful existence.
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(News report from Issue No. 209, published on Nov.19 2014)
NOV. 7 2014 (The Conway Bulletin) – Kairat Kelimbetov, head of the Kazakh Central Bank, said the tenge currency would not be devalued for at least three years. The comments, made at a conference in Almaty, were the strongest indicator yet that, despite a falling rouble, the tenge would not devalue for the second time this year.
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(News report from Issue No. 208, published on Nov.12 2014)
NOV. 10 2014 (The Conway Bulletin) – The sharp fall in the price of oil has acted as a wake-up call for Kazakhstan, economy minister Kairat Kelimbetov said in an interview with the FT.
Virtually admitting that Kazakhstan had been caught off guard by the decline by roughly a third in the price of oil since June, Mr Kelimbetovsaid that the government was the economy and to make it planning measures to shore up more attractive to investors.
“Next month the government will be ready to announce some counter cyclical fiscal policy, with big plans in infrastructure,” he said in the interview in Almaty.
Economists have warned that a devaluing rouble and falling oil prices will combined to knock Kazakhstan’s growth rate.
And the falling economy is also knocking investor confidence. Energy analyst Sergei Smirnov said that with Brent oil prices falling to a four year low of $82/barrel it makes projects such as Kashagan unprofitable.
“Offshore oil production is always much more expensive than onshore production,” he said according to media.
Kazakh officials who have staked their credibility and the country’s economic prosperity on Kasahgan but the project is already behind schedule and running over budget.
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(News report from Issue No. 208, published on Nov.12 2014)