Tag Archives: economy

Kyrgyz CB keeps interest rate steady

JUNE 28 2017 (The Bulletin) — Kyrgyzstan’s Central Bank kept its key interest rate steady at 5% because of rising inflation and economic growth. The rate decision is good news as it will be seen as a positive assessment of the Kyrgyz economy which has been battling against a downturn over the past three years or so. Inflation in Kyrgyzstan is currently running at around 3.8%. At the end of last year it was recording deflation.

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(News report from Issue No. 335, published on July 3 2017)

Currencies: Kyrgyzstan’s som

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JULY 3 2017 (The Bulletin) — The Kyrgyz Central Bank said that the economy was picking up, electing to keep interest rates steady, but Kyrgyzstan’s som currency has continued to fall. It is now trading at around 69.2/$1, its lowest since March. If its drops through the 69.4/$1 barrier it will hit its lowest value since September.

The turnaround in the currency has been startling and highlights just how vulnerable the currencies of Central Asia are to the whims of their governments. Analysts said that the recent drop in the value of the Kyrgyz som from 67.2/$1, its highest level since mid-2015, has been controlled and bears the hallmarks of a managed decline.

Analysts have warned that inflationary pressures have been built into the Kyrgyz economy. A decline in the value of a national currency is one way that inflation seeps out. The Central Bank said that inflation was now around 4.4%, a large jump from the end of last year when it was measuring deflation.

GDP growth for the first five months of the year was over 6%, outpacing expectations.

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(News report from Issue No. 335, published on July 3 2017)

Azerbaijan’s IBA improves restructuring deal

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JUNE 19 2017 (The Bulletin) — The International Bank of Azerbaijan bowed to pressure from its creditors to improve the terms of its proposed restructuring deal.

Essentially the new terms ensure more flexibility for IBA creditors and slightly higher and more frequent interest payments. They had accused the bank of preparing a restructuring programme that favours Azerbaijani debt holders.

IBA has presented different options to creditors holding $3.3b of debt, although the bottom line was that they will lose around 20% of their investments. It had said that creditors could only choose one option although it has now mellowed on this demand.

“The ‘first come, first served’ allocation mechanism has been changed to an 11 business day early bird period,” IBA said in a statement.

IBA said in May that it had missed a deadline to repay a creditor and that it needed to restructure $3.3b of debt. The announcement rocked investors and analysts who have been warning that the Azerbaijani banking system was teetering towards a default.

Bondholders were still sceptical of the new deal, saying that it was not much improved from the original proposition.

The FT quoted Lutz Roehmeyer, a portfolio manager at Landesbank Berlin as saying that he would vote against the new proposal. “International investors can’t understand why an oil-rich country with a huge sovereign wealth fund does not have the money to pay back,” he said.

Other creditors warned that Azerbaijan has damaged its reputation and will find it harder to borrow money in the future and that it needed to do much more to diversify its economy away from oil and gas.

They now have until July 18 to approve the deal.

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(News report from Issue No. 334, published on June 26 2017)

Turkmen economy is ailing

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JUNE 21 2017 (The Bulletin) — Turkmenistan’s economy is stalling and its prospects looking increasingly bad, Radio Free Europe/Radio Liberty reported in a podcast.

Pulling accurate information from Turkmenistan is complicated with most analysts describing GDP growth data permanently showing a 6% expansion as both unrealistic and misleading. Instead they are increasingly following revenue export data which measured $5b last year against $9b in 2014. This gives a rough indication of how much money the Turkmen government, driver of the economy, has to spend.

Energy prices collapsed in 2014, hitting the Turkmen economy particularly hard as it is reliant on gas sales to China.

The US-funded RFE/RL said that the an informal barter economy had grown as cash was in such short supply.

“I would call this a great Turkmen Depression,” said Farrukh Yussupov, head of the RFE/RL Turkmen service. “People are not getting paid for months and at the bazaars not only do you see fewer buyers but today we are reporting that there are no sellers either.”

RFE/RL also said that President Kurbanguly Berdymukhamedov had ordered regional governments to meet their own expenses as central government couldn’t afford to prop them up.

The official rate of the Turkmen manat is 3.5/$1 but sources on the RFE/RL report in Ashgabat said that on the Black Market the manat is trading at around 7/$1.

Earlier this year, Mr Berdymukhamedov ordered his government to cut generous Soviet- era subsidies as a way of saving money, a certain sign that the economy was in trouble.

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(News report from Issue No. 334, published on June 26 2017)

Uzbekistan warns that inflation is accelerating

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TASHKENT, JUNE 24 2017 (The Bulletin) — Inflation in Uzbekistan is accelerating fast, the country’s Central Bank said in a rare statement giving economic guidance.

Uzbekistan is Central Asia’s most populous country and the admission will alarm other neighbouring governments who have been hinting at inflationary pressures built into their economies.

As well as warning of inflationary pressures, Uzbekistan’s Central Bank also said that it was pushing up its key interest rate to 14% from 9%, although it was unclear how much impact this rise would have on an economy underpinned by government support and the Black Market.

“This decision is due to an acceleration of inflation over the past period and the need to limit the increased inflationary risks,” the Uzbek Central Bank said in a statement.

“Along with the seasonal fluctuations and supply factors, inflation has been influenced by monetary factors such as the acceleration in lending of the national currency into the economy and its devaluation compared to previous years.”

The unusually frank guidance from the Central Bank may also be linked to both a change in Central Bank chief and a shift in the Uzbek government’s mindset.

Fayzulla Mullajanov, Central Bank chief since independence from the Soviet Union in 1991 and a relic from a Soviet-tinged bygone era, died in May. Parliament has approved Mamarizo Nurmuratov as his replacement.

Mr Nurmuratov is another long- serving Central Bank insider and had been Mr Mullajanov’s adviser but he may have been told to open up the reclusive institution by President Shavkat Mirziyoyev. Mr Mirziyoyev has appeared determined to open up Uzbekistan since taking over from Islam Karimov in September last year.

The Uzbek Central Bank’s statement also referenced the depreciation of its currency. It has steadily managed a drop in value of the Uzbek soum of around 0.7% per week over the past year. In the last 12 months it has dropped by around a third to trade, officially, at 3,930/$1. On the Black Market, the soum is trading at 8,300/$1, according to uzdollar.com.

Uzbekistan’s economic woes are mirrored across the region. A drop in oil prices in 2014, reduced the value of its gas exports and triggered a recession in Russia. Uzbekistan, like its Central Asian neighbours, relies on Russia as an economic driver, creating jobs and markets. Remittances from Russia have picked up but are still at a third of the level of 2014.

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(News report from Issue No. 334, published on June 26 2017)

IMF hands out another loan to Armenia

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JUNE 24 2017 (The Bulletin) — The IMF released the fifth and final loan of $21.6m to Armenia, media reported, completing a promised $111.6m deal pledged in 2014. It said that Armenia’s economy was set to improve over the next few years after a tough period. It particular, the IMF praised Armenia’s spending prudence.

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(News report from Issue No. 334, published on June 26 2017)

Currencies: Kazakhstan’s tenge, Uzbekistan’s soum

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JUNE 19 2017 (The Bulletin) — Falling oil prices have dented the Kazakh tenge, pushing it down to 320/$1, its lowest level since mid- February. This is a fall of 1.5% for the week, matching the fall of Brent oil. Brent oil was down at $47.37/barrel, down 1.6% for the week.

Overall, though, the Kazakh tenge is still trading up around 4% from where it started the year, although it has fallen back from highs hit in May. In May, the tenge traded at 310.6/$1 and had looked at one point as if it was going to push through the barrier.

There was little other currency moves this week, with the Azerbaijani manat staying unaffected by the fall in oil prices, and the Uzbek soum continuing its steady weekly 0.7% tick down.

ENDS

(News report from Issue No. 333, published on June 19 2017)

Georgia’s CB keeps interest rate at 7%

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JUNE 14 2017 (The Bulletin) — Georgia’s Central Bank said that it was keeping its key interest rate at 7% because of stubbornly high inflation. It said that inflation in May was 6.6%, above its 4% annual target, although it also said that it expected the rate of price rises to drop in the second half of the year. Higher taxes and increased prices for imported goods have pushed up prices in Georgia this year. Georgia had slashed rates last year to 6.5% from 8% but started to raise it again in January.

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(News report from Issue No. 333, published on June 19 2017)

Road accidents cost billions in Kazakhstan

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JUNE 14 2017 (The Bulletin) — Road accidents in Kazakhstan are denting its economic potential and will hold back China’s much- vaunted “One Belt, One Road” trade initiative to links East Asia with Europe via Central Asia, the Washington-based Centre for Strategic and International Studies said in a new report. It estimated that traffic accidents cost Kazakhstan $9b a year, the equivalent of 4% of GDP.

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(News report from Issue No. 333, published on June 19 2017)

Turkmen economic growth to be lumpy, says IMF

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JUNE 15 2017 (The Bulletin) — In a statement, the IMF said that Turkmenistan’s economy would grow at an uneven rate over the next few years with inflation remaining at “moderate” levels while the economy dealt with various external pressures linked to its over-reliance on gas exports as a revenue earner. It put both GDP growth and inflation at around 6% over the next couple of years.

ENDS

(News report from Issue No. 333, published on June 19 2017)