Tag Archives: currency

Central Banks in Kazakhstan and Georgia fight deflationary pressures

ALMATY, JUNE 10 2016 (The Conway Bulletin) — Currencies across the Central Asia and South Caucasus region have stabilised this year after losing 30% to 50% of their value in 2015 thanks, in part, to record high interest rates but governments are now having to deal with deflation.

As well as raising interest rates to their highest level since the Global Economic Crisis of 2008/9, Central Banks bought heavily to defend their currencies. The Kazakh Central Bank said it bought $3.7b in Jan.-May 2016 and in Georgia, the Central Bank intervened twelve times in just two months, although on a smaller scale.

And both Central Banks have now started unwinding high interest rates, hoping to spark economic activity.

Earlier this year the Kazakh Central Bank cut its key interest rate to 15% from 17%. Georgia’s Central Bank cut its interest rate to 7.5% from 8% and promised further cuts. New data from Georgia’s statistics agency highlighted the challenge. It said that prices in May dropped by 0.4%, the third consecutive month of falling prices. Year-on-year inflation in May measured 2.1%, down from a high of 6.3% in November.

And this scenario is playing out across the region.

Last month Armenia’s Central Bank said that year-on-year inflation measured minus 1.9% and immediately cut interest rates by 0.5% to 7.75%.

But Alex Nice, an analyst at the Economist Intelligence Unit, said that the region’s weak banking systems and high levels of dollarisation means that there is little Central Banks can do to impact economic activity.

“The exchange rate is a more powerful lever for managing prices in the economy [than the official interest rate],” he said.

ENDS

(News report from Issue No. 284, published on June 10 2016)

Exchange rate stabilises in Kazakhstan

MAY 30 2016 (The Conway Bulletin) — Kazakhstan’s Central Bank said tenge-denominated deposits had grown steadily in Q1 2016, due to the stabilisation of the exchange rate with the US-dollar after five months of high volatility. Commercial banks increased interest rates on deposits in an effort to attract customers. The C.Bank’s decision to lower interest rates earlier in May could now depress deposits and increase spending.

ENDS

(News report from Issue No. 283, published on June 3 2016)

EBRD to issue bond to Azerbaijan’s economy

MAY 25 2016 (The Conway Bulletin) — The EBRD is ready to issue a manat- denominated bond to help de-dollarise Azerbaijan’s economy, the Bank’s President, Sir Suma Chakra- barti, said. While the amount of the issue was not disclosed, Sir Suma said the bond will be sold within Azerbaijan to boost the local currency’s credibility.

ENDS

(News report from Issue No. 282, published on May 27 2016)

Currency woes in Uzbekistan, Georgia and Armenia

MAY 16 2016 (The Conway Bulletin) – An IMF paper on the state of money markets across the South Caucasus and Central Asia said that most currencies are still overvalued against the US dollar, despite depreciations that have taken place over the past 18 months. The IMF highlighted that in January the Uzbek sum was 30% above its market value, and the Georgian lari was around 15% overvalued. The Armenian dram was the only currency that, according to the IMF, traded below its value.

ENDS

(News report from Issue No. 281, published on May 20 2016)

Manat stabilised, says Azerbaijan’s Bank chairman

MAY 9 2016 (The Conway Bulletin) – Elman Rustamov, chairman of Azerbaijan’s Central Bank, said the manat currency will maintain a stable exchange rate with the US dollar for the rest of the year, dismissing rumours of further depreciation. The Central Bank devalued the manat in February 2015 and later, in December, ditched the currency peg to the US dollar. It is now worth half its Jan. 2015 value.

ENDS

(News report from Issue No. 280, published on May 13 2016)

Cash shortage spreads to Uzbek capital

MAY 2 2016 (The Conway Bulletin) – Several employees at state-owned companies in Tashkent have not received payment since February, according to sources interviewed by Eurasianet. This is a sign that a shortage of hard currency, previously confined to the provinces, has spread to Uzbekistan’s capital. Wage arrears cause distress among the population. Last year, a leaked letter from the Central Bank revealed a shortfall of 1.5 trillion sum ($517m at the official rate) in the state budget.

ENDS

(News report from Issue No. 279, published on May 6 2016)

Georgian CBank intervenes, again

MAY 5 2016 (The Conway Bulletin) – Georgia’s Central Bank intervened in the currency market for the sixth time in two months, in an effort to dampen the appreciation of its lari currency. The Central Bank bought $20m, injecting lari into the market. The intervention came as the lari reached 2.21/$1, its strongest rate since July 2015.

ENDS

(News report from Issue No. 279, published on May 6 2016)

Kazakhstan’s CBank cuts interest rate as inflation begins to slow

MAY 5 2016, ALMATY (The Conway Bulletin) — Kazakhstan’s Central Bank cut its key interest rate by two percentage points to 15% because it said that inflation was slowing and the overall economic outlook was improving.

The consumer price index grew in April to an annualised rate of 16.3%, its highest since 2009, but the Central Bank said that the pace of inflation had slowed.

“Seasonally adjusted, annualised month-on-month inflation for each of the last three months was within the target range for the annual inflation set between 6% and 8%,” the Central Bank said in a statement linked to its rate change.

“A survey of households also showed that expectations of inflation have subsided as well.”

After months of poor economic data and a 50% devaluation of the tenge currency, any prognosis on Kazakhstan’s economy which is even vaguely positive will be seized upon and lauded. This is the first time in months that Kazakhstan’s Central Bank has shown confidence in its ability to control the money market, a sign that the worst period of a regional economic downturn might be over.

Still, the Central Bank did add a large dash of caution to its outlook.

It said that a potential downside risk to the economy was the “increased tenge-denominated high interest rate liabilities” held by commercial banks, which could put pressure on the financial sector. This is, essentially, a reference to bad loans.

ENDS

(News report from Issue No. 279, published on May 6 2016)

Turkmenistan’s economy needs reforming, says IMF

MAY 5 2016 (The Conway Bulletin) – Turkmenistan must push through more structural reforms of Soviet era policies and characteristics still embedded in its economy if it is to navigate its way through an economic storm that has hit the region, the IMF said after a mission to Ashgabat.

Turkmenistan’s economy grew 6.5% last year, the IMF said, but there is likely to be a slowdown in 2016 because its economy it too tightly linked to gas.

“2016 could see another slight slowdown in growth on the back of a broadly stagnant hydrocarbon economy and slowing (albeit still massive) investment,” the IMF said in a statement.

In its assessment, the IMF praised austerity measures taken by the government over the past 18 months to counter the impact of the economic downturn. In particular, it praised the devaluation of the manat currency and the decision to phase out subsidies to the population.

“A fundamental re-orientation of the economy through a further acceleration of wide-ranging structural reforms, including in the areas of business climate and governance, as well as market-driven diversification, offers the best way to boost future growth rates,” the IMF said.

Turkmenistan devalued its manat currency by 19% on New Year’s Day 2015, its first currency devaluation for seven years and this year it said that it would scrap much cherished state subsidies of utilities.

Both policy moves were designed to bolster Turkmenistan’s listing economy.

ENDS

(News report from Issue No. 279, published on May 6 2016)

Azerbaijan lifts loan ban

MAY 5 2016 (The Conway Bulletin) – Azerbaijan’s government lifted a month-long ban on foreign currency loans, official media reported. The country’s Financial Markets Supervisory Authority, which acts as a regulator, had forbidden banks from granting loans denominated in foreign currency on April 5 to try and strengthen the local manat currency.

ENDS

(News report from Issue No. 279, published on May 6 2016)