May 19 2014 (The Conway Bulletin) – Halyk Bank, the second largest bank in Kazakhstan, said its profit in the first three months of the year had almost doubled. Importantly, Halyk said much of this profit increase was due to a fall in the amount of poor loans on its books, an issue Kazakh banks have been grappling with since the 2008/9 economic crisis.
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(News report from Issue No. 185, published on May 21 2014)
May 19 2014 (The Conway Bulletin) – Armenia increased by 14% the amount of transactions completed through their bank cards or credit cards during the first quarter of the year compared to the same period a year earlier, media reported. This is important as it highlights increased consumer sophistication in Armenia.
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(News report from Issue No. 185, published on May 21 2014)
May 19 2014 (The Conway Bulletin) – Tajik president Emomali Rakhmon held talks in Dushanbe with Wan Zhenhua of Zijin Mining’s Zarafshon copper-gold- silver mining company in Khujand, Tajikistan (May 19).
Reports made the meeting sound rather Soviet. They listed the various social achievements which included finding work for 2,000 people since 2007 and noting that Chinese investment has reached $235m. The mine now produces half Tajikistan’s total gold production.
But the real story is elsewhere.
Typically, gold mining projects can take up to seven years to become profitable, while red tape surrounding license issuance and political unrest in Central Asia can considerably extend timeframes.
State-owned Zijin, China’s largest gold producer, also owns a gold mine in Kyrgyzstan’s Chui province. In Kyrgyzstan, Zijin had to evacuate roughly 250 employees from their operation in Orlovka village, Chui, in 2012 when one of their excavators reportedly killed a local’s horse, triggering an attack on the company’s offices.
Given the reluctance of other foreign investors to mine in Kyrgyzstan and Tajikistan, some believe China’s interest in mining projects is about strategic control of mineral wealth in the two countries, rather than money.
“Chinese companies take on projects that in my mind are not profitable,” Valentin Bogdetski, head of the Kyrgyz Miners Association told the Conway Bulletin.
“Last year, a Chinese firm won a license for an iron ore concession in Zhetim-Too [Naryn province]. But this ore has little market value, so why do they want the license?”
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(News report from Issue No. 185, published on May 21 2014)
May 20 2014 (The Conway Bulletin) – A row is brewing in Armenia over whether banks should write off loans to farmers as a form of compensation for damage to their crops caused by a cold snap in March.
Despite pressure from farming unions, Armenia’s Central Bank chief, Artur Javadyan, said that banks could not simply write-off the loans.
Mr Javadyan said that banks could not risk financing farmers who already receive beneficial loan rates. The government partly pays the interest on loans to farmers.
“We have no right to force the banks to risk deposit holders’ and stockholders’ funds,” he said according to reports.
A heavy snow storm on March 30 seriously damaged crops in Armenia and farmers have asked for compensation. The row highlights just how important farming is in Armenia.
Rural Armenia is poor and the farmers often merely scrape a living. They are heavily reliant on loans and beneficial rates from the government.
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(News report from Issue No. 185, published on May 21 2014)
MAY 13 2014 (The Conway Bulletin) – Armenia’s Central Bank cut its key interest rate to 7.25% from 7.5% after data showed that inflation was within its target range, Reuters reported quoting the Central Bank. Annual inflation in April measured 4.4% within the 2.5% to 5.5% bracket.
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(News report from Issue No. 184, published on May 14 2014)
MAY 8 2014 (The Conway Bulletin) – For the third year in a row, Kazakhstan’s Central Bank won the award for the best-designed new banknote. This year a new yellow and brown 1,000 tenge note commemorating the historical warrior leader Kultegin won the prize. Kazakhstan views the award as a way of boosting its international status.
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(News report from Issue No. 184, published on May 14 2014)
MAY 7 2014 (The Conway Bulletin) – The Kazakh Central Bank should relax its monetary policy and allow the tenge to appreciate, media quoted the IMF as saying after a field trip to Kazakhstan.
It said that the tenge was now undervalued and that the narrow band that the Central Bank anchors the currency in should be widened.
In February, the Kazakh Central Bank suddenly cut the value of the tenge by 20%, a move the IMF said could trigger inflationary pressure.
The assessment is hardly a ringing endorsement of the Kazakh Central Bank and its policies.
It appears that Kazakh consumers, also, agree with the IMF. Fresh data showed that since December the amount of savings held in US dollars has increased by around a third. People are clearly nervous of the tenge.
The IMF also highlighted a much talked about weakness in the Kazakh economy; the high proportion of non-performing loans. Roughly a third of all loans are considered non- performing and this, the IMF said, had to be cut.
A senior manager in the currency sector in Almaty said that both relaxing the band that the tenge was held in and cutting the proportion of non-performing loans was wishful thinking by the IMF.
“Such a decision would mean creating panic in the society,” he said on condition of anonymity of the IMF’s proposal to relax the currency band.
“The government wants the opposite. Everything has to be calm and quiet. Increasing the range would enhance speculative moves in the currency market.”
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(News report from Issue No. 184, published on May 14 2014)
MAY 13 2014 (The Conway Bulletin) – Kairat Kelimbetov, head of the Kazakh Central Bank, said he was concerned about the negative impact on Kazakhstan’s economy of sanctions on Russia. Mr Kelimbetov said 7% of Kazakhstan’s exports went to Russia and 36% of its imports came from Russia. Remittances are also important.
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(News report from Issue No. 184, published on May 14 2014)
MAY 10 2014 (The Conway Bulletin) – Azerbaijan cuts its key interest rate to a three year low last month because of a drop in inflation, Elman Rustamov, head of the Central Bank, said.
The Azerbaijani economy is generally on the up. There are some weak points, such as loose controls over consumer borrowing, but the Central Bank is managing to maintain growth rates as well as keeping inflation under control.
So confident has the Central Bank been feeling that on April 30 it cut its key interest rate to 4.25% from 4.75%. This was the first rate cut for 14 months and marks the lowest level since 2011.
Mr Rustamov explained the thinking behind the rate cut.
“Inflation in the country is at its lowest level. By the outcome of the first quarter, the inflation in the country stands at 2%,” he said.
“Interest rates need to be reduced. They should be reduced to such a level that they will be suitable both for the population and for businesses.”
Of course slowing inflation can also mask other problems. There may have been a slowdown in consumer demand and the economy may need a nudge.
But relaxing interest rates also presents a risk to Azerbaijan’s economy. Recent reports from international economists have all highlighted the threat from consumer borrowing. Moody’s said that consumer loans would grow by 20% this year, compared to 25% last year.
Cutting interest rates is hardly going to curb this trend.
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(News report from Issue No. 184, published on May 14 2014)
MAY 13 2014 (The Conway Bulletin) – TALCO, the aluminium plant that is at the centre of Tajikistan’s economy, cut production by 39.5% between January and March, media reported quoting the economy and trade ministry. TALCO had predicted a fall in aluminium production in February. It blamed the fall on a global crash in aluminium prices.
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(News report from Issue No. 184, published on May 14 2014)