FEB. 14 2017 (The Conway Bulletin) — Armenia’s Central Bank cut its key interest rate yet again to 6% from 6.25%, hoping to give its economy a boost. Armenia has now slashed its interest rate from 10.5% in 2015. The Central Bank’s biggest worry is deflation. Annualised deflation in January measured 0.6%, the Central Bank said.
ENDS
Copyright ©The Conway Bulletin — all rights reserved
(News report from Issue No. 317, published on Feb.17 2017)
FEB. 15 2017 (The Conway Bulletin) — An IMF delegation flew into Tbilisi for a two-week mission that could trigger a major injection of cash linked to economic changes. Georgia has been one of the most reform-minded countries in the former Soviet Union acting as something of a posterboy for IMF- backed changes. The government, though, is also looking for support to push through a tough economic downturn. GDP growth in 2016 was 2.2%, its lowest since 2009 when the economy shrank by 3.8% during the Global Financial Crisis.
ENDS
Copyright ©The Conway Bulletin — all rights reserved
(News report from Issue No. 317, published on Feb.17 2017)
FEB. 17 2017 (The Conway Bulletin) — The Kazakh tenge continued to strengthen throughout the week, hitting 318.4/$1 at the close of play on Thursday. This is its highest level since December 2015 and represents nearly a 5% increase in its value in 2017.
Analysts have said that the tenge closely follows the Russian rouble, which has been strengthening throughout the year to 58.5/$1, a level not seen since mid-2015. The rising price of oil and stability around Ukraine and Crimea have helped to strengthen the rouble.
Kazakhstan’s economy, like the rest of the region, is closely linked to Russia’s. The free-float of the tenge in 2015 has allowed it to track the rouble more closely.
With this in mind, analysts have said that they expect a further strengthening of the tenge as it catches up with the rouble. Some have said that it’s not unreasonable to anticipate a value below 300/$1 for the tenge by the end of the year.
ENDS
Copyright ©The Conway Bulletin — all rights reserved
(News report from Issue No. 317, published on Feb.17 2017)
FEB. 14 2017 (The Conway Bulletin) — Tajikistan desperately needs to create more and better jobs if its economy is going to grow at a sustained rate, the World Bank said in a new report. In its report, the World Bank said that only 43% of Tajiks of working age were in the job market. Remittances sent home from workers, mainly in Russia, is the biggest generator of GDP growth for Tajikistan.
ENDS
Copyright ©The Conway Bulletin — all rights reserved
(News report from Issue No. 317, published on Feb.17 2017)
FEB. 14 2017 (The Conway Bulletin) — An informal study of bread prices by the ranking.kz website showed that prices have risen by 8-9% in the past year. This is important because the survey acts as a balance on official inflation data which has said that price rises have been more gentle. Economists have been predicting a jump in prices, linked to the devaluation of the tenge.
ENDS
Copyright ©The Conway Bulletin — all rights reserved
(News report from Issue No. 317, published on Feb.17 2017)
FEB. 17 2017 (The Conway Bulletin) — First came the oil price collapse, then remittance flows started stagnating and (some) currencies (think of the tenge and the Azerbaijani manat) halved. Now the debt mountain, or perhaps debt tsunami is a better description, looms large, threatening to drown the countries of Central Asia and the South Caucasus.
Kazakhstan is the latest to propose a major bailout of its banking sector. Finance minister Bakhyt Sultanov said on Feb. 13 that the government would potentially use $6.3b to prop up banks listing under the weight of bad loans. The Tajik government is in talks with the IMF to borrow cash to help prop up its banking sector and in Azerbaijan the government has been, as quietly as possible, buying up chunks of the biggest bank. It now owns more than 76% of the International Bank of Azerbaijan, allowing it to smooth out its debt crisis without attracting too much attention.
Ratings agencies and analysts have been warning of this denouement.
As long ago as December 2015, Standard & Poorsratings agency said: “Medium-term prospects for Kazakhstan’s banking system have deteriorated in 2015 due to lower oil prices, the economic slowdown (especially in non-extractive sectors) and the weaker tenge.”
And that prediction has been borne out.
The frustration is that we have been here before. In the Global Financial Crisis of 2008/9 bad debt built up in banks in Kazakhstan forcing the government to step in. It bought out BTA Bank, at the time one of the country’s biggest lenders, and a handful of smaller banks. It was expensive but staved off disaster and the Kazakh government pledged not to find itself in a similar position again.
The government finally offloaded BTA bank to pro-government businessmen in 2014/15 and proposed to impose rules and regulations that would require its banks to bulk up their capital and refrain from handing out loans, mainly mortgages, to people unworthy of them.
Clearly, the Kazakh Central Bank and other regulators across the region, have failed. Certainly they have not been helped by the sharp currency devaluation that made US dollar-denominated mortgages unserviceable.
Better macro-economic policies, tighter rules on lending and a more clear-headed approach to dealing with problems would surely have put the Central Banks in better positions than they now find themselves. Governments in the region are once again having to buy themselves out of trouble.
By James Kilner, Editor, The Conway Bulletin.
ENDS
Copyright ©The Conway Bulletin — all rights reserved
(News report from Issue No. 317, published on Feb.17 2017)
FEB. 13 2017 (The Conway Bulletin) — SOFAZ, Azerbaijan’s $35b oil wealth fund, has invested $100m into Redwood Japan Logistics Fund II which invests in property across East Asia and Australia. SOFAZ has been diversifying its investments over the past few years, often into property. Hurt by the steep drop in value of its energy exports, Azerbaijan’s government has been challenging SOFAZ to take more risk to boost profit.
ENDS
Copyright ©The Conway Bulletin — all rights reserved
(News report from Issue No. 317, published on Feb.17 2017)
FEB. 7 2017 (The Conway Bulletin) — The value of Kazakhstan’s exports fell by 20% in 2016, the Central Bank said, reflecting just how heavily the drop in oil prices has hit the country. It said that exports dropped to $37.2b. In 2016, the average price of a barrel of Brent oil was $42.80. In 2015 it had been $50.80. This year, oil prices have hovered around $55/barrel.
ENDS
Copyright ©The Conway Bulletin — all rights reserved
(News report from Issue No. 316, published on Feb. 10 2017)
BISHKEK, FEB. 8 2017 (The Conway Bulletin) — Kyrgyzstan’s finance ministry laid off 220 employees to try and ease costs so that it can battle through a deep, and long, economic downturn.
Senior officials from the ministry defended the layoffs as part of a so- called “optimisation process” but in reality this was a simple cost cutting exercise and more evidence that the Kyrgyz economy is under strain. The cuts were aimed at low and mid ranking staff, often in regional offices.
Finance minister Adylbek Kasymaliev said: “As a result of optimisation, we will save between 30m and 60m som ($435,000 to $870,000).”
Kyrgyzstan is suffering from a recession in Russia, linked to the collapse in oil prices, which has destroyed jobs for migrants. Along with Tajikistan, Kyrgyzstan is one of the world’s most remittance-dependent countries.
Independent expert and head of the public council under the ministry of finance, Bakyt Satybekov, told the Conway Bulletin that the finance ministry, and other public bodies, had become bloated.
“It is good that the government optimised personnel at the ministry of finance and its subordinate authorities, it should have done this a long time ago to avoid duplication (of jobs) and to save money,” he said.
Mr Satybekov’s job lies outside central government. He is charged with monitoring the performance of the finance ministry.
Kyrgyzstan is not alone in slashing budgets and costs. Georgia has laid off mid-ranking Georgian army officers and Azerbaijan has slashed various social projects, such as a rural internet roll-out.
On the streets of Bishkek the layoffs were greeted with wry bewilderment. Surely, most people that a Conway Bulletin correspondent spoke to said, it would be better to fire the heads of the departments.
“It would be better to fire heads of some departments and their deputies in the ministry who secure their places for years rather than firing ordinary people from the regions,” said Jeenbek, a Bishkek resident.
ENDS
Copyright ©The Conway Bulletin — all rights reserved
(News report from Issue No. 316, published on Feb. 10 2017)
FEB. 7 2017 (The Conway Bulletin) — WorldRemit, a money wire service, said that it had extended its services to Armenia and Kazakhstan as well as Ukraine and Belarus, through a partnership with the Russian payment system Contact. Previously, London-based WorldRemit has concentrated its services in southeast Asia and Africa. It said that WorldRemit will operate 330 service points in Kazakhstan and 65 in Armenia. Remittances are a vital plank of the economies of Central Asia and the South Caucasus.
ENDS
Copyright ©The Conway Bulletin — all rights reserved
(News report from Issue No. 316, published on Feb. 10 2017)