NOV. 26 (The Bulletin) — Uzbek Central Bank chief Mamarizo Nurmuratov said that he may start cutting interest rates from next year as it focuses its attention on trying to beat inflation. Uzbekistan last changed its key interest rate in 2018 when it moved it to 16% from 14%. This month the Central Bank has been handed more power and told to focus on dampening inflation which it expects to hit 13% next year.
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— This story was first published in issue 430 of the weekly Bulletin.
The biggest mover this week was the Georgian lari which fell by half a percentage point to 2.9591/$1, its lowest rate against the US dollar for at least five years.
Analysts said that the drop in lari value was linked to concern about rising inflation that has undermined strong economic growth this year.
Economists also expect the region’s other big currency, the Kazakh tenge, to fall. In a Reuters poll of seven analysts, four said that the tenge would fall further this year. All seven said that it would be trading at a lower value in 12 months time than it does currently.
They said that a government budget gap between spending and income was a concern. Reuters reported that the government deficit was 813b tenge ($2.1b) on Oct. 1, triple the deficit of one year earlier. This has weighed on the performance of the tenge this year which has fallen from 380.96/$1 to nearly 389/$1.
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— This story was first published in issue 428 of the weekly Bulletin.
NOV. 8 (The Bulletin) — Armenia’s Central Bank said that economic growth this year would hit around 7%, far exceeding initial expectations of 4.9%. It said that manufacturing output, construction and strong private consumption had all spurred the growth. The government of PM Nikol Pashinyan has been been talking up its economic policies since a revolution in 2018.
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— This story was first published in issue 428 of the weekly Bulletin
NURAFSHON/Tajikistan/Nov. 11 – According to the two elderly men standing outside the gates of the abandoned factory, this used to be a thriving town of 5,000 people. Now it is desolate, a memorial to the Soviet Union’s hubris.
Dilapidated ‘monogorods’, with their abandoned factories, were once a feature of the former Soviet Union. Over the past few years, though, they have become harder to find.
Through its planned economy the Soviet Union built thousands of towns and cities around single factories or mines. When the Soviet Union collapsed in 1991 so did its industry and so did the ‘monogorods’. A reminder of a failed past, many of these ‘monogorods’ have now been spruced up. In Tajikistan, though, on the poor fringe of the former Soviet Union this isn’t the case.
In Nurafshon, a stray dog ambled across the deserted main street and a woman pushed a pram along the cracked pavement. In one shaded corner of the empty square, a group of old men huddled over a chess set.
The midday sun beat down on this treeless mountain plateau near Tajikistan’s border with Uzbekistan. It sparkled, mischievously, off the sign of the long-closed cafe, preserved, almost perfectly, by the dry air.
“All the young men have left,” one of the elderly men said. “They need to find work and there hasn’t been any here since 1992 when the factory closed.”
This factory in Nurafshon used to produce strip lighting, and on an industrial scale. Why this factory here, though, in this remote corner of Moscow’s former hegemony?
The question was greeted with a shrug.
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— This story was first published in issue 428 of the weekly Bulletin.
TBILISI/Nov. 7 (The Bulletin) — London-listed Bank of Georgia said that its Q3 profit was 30% higher this year than in 2018, pushing its shares up by nearly 8%.
The bank, one of the two biggest banks in Georgia, generally performs well if Georgia’s economy is performing well and it has boomed over the past couple of years, helped by a surge in tourism and renewed business confidence after a slump in 2014-16.
In what it described as an “outstanding” quarter, Bank of Georgia said that its income from interest was 1.8% higher than Q3 2018 at 188.7m lari and that there had been a 22% rise in net fee and commission income to 48m lari.
Bank of Georgia CEO, Archil Gachechiladze, said that the bank had shifted from a high yield, high risk loan portfolio to a lower risk and lower yield portfolio.
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— This story was first published in issue 428 of the weekly Bulletin.
NOV. 5 (The Bulletin) — Lydian International, the Colorado-based mining company, has complained that ministers in Armenia are trying to block it from exploiting the Amular mine in the south of the country once again. It said that a minister has thrown out plans it had put forward on just how much water it planned to take out of the Darb river. Work was stopped at the mine in June 2018 because of various environmental complaints but in October officials greenlighted the project.
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— This story was first published in issue 428 of the weekly Bulletin.
NOV. 7 (The Bulletin) — Banks in Kazakhstan are still giving out risky retail loans, Moody’s the ratings agency said. Bank lending in Kazakhstan is a contentious issue as it has been highlighted as one of the biggest contributors to weakness of the Kazakh economy. Moody’s said that the ratio of retail loans to overall household income will be 2.4 times by mid-2020, the level reached in 2013 just before a recession. Kazakhstan’s Central Bank is the country’s financial supervisor and has tried to impose rules that were supposed to improve lending rules to limit exposure to bed debt.
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— This story was first published in issue 428 of the weekly Bulletin.
NOV. 4 (The Bulletin) — Inflation in Georgia hit 6.9% in October, up from 6.4% in September, the national statistics office said, confirming Central Bank warnings that prices were rising at an unsustainable rate. Georgia’s economy has been booming but inflation has undermined growth and has forced the Central Bank to raise interest rates three times since the start of September.
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— This story was first published in issue 428 of the weekly Bulletin
ALMATY/July 17 (The Bulletin) — In its annual assessment of Kazakhstan’s economy and business, the IMF said that the Kazakh banking sector is still vulnerable.
The fragility of Kazakhstan’s financial sector has undermined economic growth over the past decade, despite intervention by regulators, who have tried to legislate against bad debt, government bailouts and forced mergers.
“Despite state support, the banking sector remains weak, with high levels of bad loans,” the IMF said in a statement.
Bad loans grew rapidly after the 2015 devaluation of the tenge. It halved in value, because of a recession in Russia and a collapse in oil prices, which made dollar-denominated loans expensive to pay off.
The Kazakh Central Bank has bailed out larger banks, and overseen the merger of the country’s two biggest banks, Halyk Bank and Kazkommertsbank, but also allowed smaller banks to go bankrupt.
Kazakhstan plans to conduct what the IMF called an “asset quality review (AQR)” of large and medium banks but the IMF said that the Kazakh Central Bank needed to be careful how it reacted to the results of the review.
“The AQR may reveal the need for additional capital; any public support should be provided only to systemically-important and viable banks, subject to contributions from existing shareholders, and in the view of the IMF staff, from the budget and not the National Bank of Kazakhstan,” the IMF said.
Construction worker dies in Tbilisi Campaigners have said that safety measures on Georgian construction sites are notoriously slack. At least six construction workers in Tbilisi have already died this year on sites and in January, seven men were killed in their sleep at the apartment they shared in central Tbilisi by a carbon monoxide leak.
The authorities have said that they will also investigate how the company managing the site where Beshkenadze died was able to hire a teenager.
The law doesn’t ban companies from hiring 16-year-olds, but they are not allowed to do hard manual job until they are 18.
It said also that there was a risk that Kazakh policymakers were trying to do too much too quickly. They want to move the Central Bank from Almaty to Nur-Sultan, a plan delayed by the 2014-17 economic downturn, and set up a new financial regulator.
“(This) carries risks that should be carefully managed, including possible gaps during the transition and insufficient bank oversight and coordination with the National Bank of Kazakhstan and government,” the IMF said.
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— This story was first published in issue 417 of the weekly Central Asia & South Caucasus Bulletin
ALMATY/Feb. 8 (The Conway Bulletin) — — Kazakhstan will postpone the IPO of state-owned oil and gas company Kazmunaigas because of poor market conditions, two sources close to the deal told Reuters.
They said that investor interest had waned for a London IPO for Kazmunaigas, as Kazakhstan had been touting last year. Kazakh officials had launched a road-show to drum up support in 2018 and had talked of selling as much as 20% of the company to raise around $6b.
The Kazmunaigas sale was supposed to have been the centrepiece of a sell off of various Kazakh state-owned assets, including nuclear agency Kazatomprom, which listed last year on the London Stock Exchange, and Air Astana, scheduled to list this year.
Reuters quoted data which said that the value of global IPOs had dropped by 83% to $2.6b in January 2019 compared to January 2018.
Kazmunaigas declined to comment.
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>This story was first published in issue 399 of The Conway Bulletin on Feb. 8 2019
Copyright The Conway Bulletin 2019