DEC. 2 2015 (The Conway Bulletin) – In an effort to prop up its manat currency, Azerbaijan’s Central Bank said it has spent nearly 60% of its currency reserves. Azerbaijan’s Central Bank held $6.8b at the end of October, down from $13.8b on Jan. 1. Azerbaijan devalued the manat by a third in February but this hasn’t stopped the slide.
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(News report from Issue No. 259, published on Dec. 4 2015)
DEC. 1 2015 (The Conway Bulletin) — Toronto-listed miner Lydian International said it had reached a $325m financing agreement to develop a gold mine in Armenia, an initiative that will boost the country’s gold output.
In a detailed statement, the company said it will receive a line of funding from US-based investment firms Orion Mine Finance and Resource Capital Funds. The money will be used to start construction at the Amulsar gold project in south- central Armenia.
Once preparation work is completed next year according to the company, Lydian forecasts a production rate of around 6 tonnes of gold per year from the Amulsar project. For a comparison, Armenia produced 3.5 tonnes of gold in 2013.
Lydian has been working on financing the project since 2006.
A fall in gold prices, down around 13% year-on-year on Dec. 1 at $1,069/ounce – a 5-year low, has put pressure on mining companies with operations in the South Caucasus and Central Asia.
Lydian’s CEO Howard Stevenson said the agreement with Orion and RCF was a major step forward, especially considering the current financial markets.
“The Financing provides over 75% of the overall financing requirement, which is a strong achievement in the current financial market,” Mr Stevenson said in a company statement
Armenian PM Hovik Abrahamyan also said the government was pleased Lydian had won backing for the project.
“The financing of the construction of the Amulsar Mine represents a significant step forward in the development of the mining industry in Armenia,” Mr Abrahamyan said in a statement.
Gold is an important cash earner for the Armenian government but although potentially lucrative for the state, the project has angered people who worry about the environmental degradation. In 2014, police dispersed a large crowd of protesters around the mine.
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(News report from Issue No. 259, published on Dec. 4 2015)
DEC. 1 2015 (The Conway Bulletin) – Kazakhstan’s Central Bank issued its first 20,000 tenge note, depicting the Akorda presidential palace and a mock Arc de Triumphe in Astana and the Eli winged statue in Almaty’s central square.
When the idea of the blue, grey 20,000 tenge banknote was conceived in 2013, it would have been worth around $129.
Now, after two devaluations linked to the drop in oil prices and the fall of the Russian rouble, Kazakhstan’s 20,000 tenge is worth $65.
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(News report from Issue No. 259, published on Dec. 4 2015)
DEC. 3 2015 (The Conway Bulletin) – Year-on-year inflation in Georgia rose to 6.3% from 5.8%, the national statistics agency said, its highest level for four years. Although the year-on-year rate is rising, the month-on-month rate has slowed to 0.3% from 0.8% in October and 1.1% in September. Like other economies, Georgia’s currency has lost value this year, pushing up the cost of imports.
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(News report from Issue No. 259, published on Dec. 4 2015)
DEC. 4 2015 (The Conway Bulletin) — The Kyrgyz som continued its slump against the dollar and now trades at above 75.5/$1. The Central Bank chairman Tolkunbek Abdygulov said the exchange rate had changed because of a speculative attack and promised to continue to intervene to prop up the currency. The regulator said that local bank FinanceCredit was found guilty of speculative trading of the som. In addition, the Central Bank fined several exchange points across the country for speculating on currency rates.
In Tajikistan, the somoni was stable at 6.7/$1, after a rough week. On Nov. 30, media reported that Dushanbe residents had to pay around 7.5somoni for $1. The Central Bank reacted by drafting a decree that shut down the remaining private exchange bureaus in the country. Earlier in April, it had forced the closure of over 800 out of a total of 1,500 exchange bureaus because it said they were taking advantage of the unstable currency markets.
On Dec. 1, the Central Bank also reported the arrest of six employees of exchange bureaus for currency speculation. As with the Kyrgyz incidents, the details of these so-called speculative attacks have been difficult to pin down.
But none of this is surprising in Central Asia’s currency markets.
We witnessed a similar trend in Kazakhstan in 2014, when a devaluation of the tenge was followed by speculative attacks on the currency and interventions to keep the tenge from plummeting. This was repeated this year again in Kazakhstan.
It is likely that both Tajikistan and Kyrgyzstan will follow this trend and crack down on private exchange bureaus to strengthen their control over exchange rates.
In much of the rest of the region, currencies did not move. The exception was Uzbekistan. The Uzbek sum reached a new record trading low, officially, at 2,755/$1. In the last year, it lost almost 15% of its value.
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(News report from Issue No. 259, published on Dec. 4 2015)
DEC. 1 2015 (The Conway Bulletin) – Toronto-listed Lydian International said it had secured the $325m finance needed to exploit a major gold deposit in Armenia. The deposit at Amulsar could transform Armenia’s economy.
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Copyright ©The Conway Bulletin — all rights reserved
(News report from Issue No. 259, published on Dec. 4 2015)
DEC. 3 2015 (The Conway Bulletin) – The World Bank predicted that Kazakhstan’s economy would grow at its slowest rate since the mid-1990s, four days after President Nursultan Nazarbayev tried to shrug off the worsening economic outlook by telling listeners during a state-of-the- nation speech that they have never had it so good.
Throughout the year economists at the World Bank have been down- grading growth rates in Kazakhstan but a new lower GDP growth estimate of 0.9% this year, smaller than growth rates in the 2008/9 global financial crisis, still came as a shock.
And worse was to follow. The World Bank said GDP growth would measure only 1.1% in 2016.
“The uncertain external outlook will dampen private investment, while the pass-through effect of the tenge depreciation will reduce house- hold consumption and public consumption will remain modest due to the ongoing fiscal adjustment.” the World Bank said in its report.
From 2017, the economic outlook would improve mainly thanks to the giant Kashagan oil field coming on- stream. But the warning signs are there.
If the World Bank’s outlook comes through, it’ll be the first time for over 20 years that growth in Kazakhstan has been so low for two consecutive years.
Three days earlier Mr Nazarbayev had tried to rally his countrymen in a televised state-of-the-nation speech that was filled with talk about toughing out the economic malaise.
He blamed factors outside his control for the economic downturn and then told his audience that they have never lived in such a prosperous period.
“Never before have our people lived as well as they do now,” he said. “We have achieved a lot.”
And Mr Nazarbayev needs to put a brave face on things. Inflation has jumped to around 10% and the value of the tenge currency has halved in the past 18 months.
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(News report from Issue No. 259, published on Dec. 4 2015)
NOV. 28 2015 (The Conway Bulletin) – Georgia’s parliament approved an increase of 96m lari ($40m) in next year’s budget to improve healthcare. The extra cash will be used by the ministry of health to bring in its universal healthcare programme. Introducing universal healthcare is a key policy of the ruling Georgian Dream coalition.
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(News report from Issue No. 259, published on Dec. 4 2015)
NOV. 23 2015 (The Conway Bulletin) – In a move designed to help oil exporters, the Kazakh government said it would cut export duty on a tonne of oil to $40 from $60. Some exporters in Kazakhstan have simply stopped production until either oil prices improved or taxes were cut.
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(News report from Issue No. 258, published on Nov. 27 2015)
NOV. 25 2015 (The Conway Bulletin) – Azerbaijan’s president Ilham Aliyev appeared to be preparing his country for a prolonged economic slump when he ordered the government to triple the amount of debt that it could take on.
He also told the Central Bank that it had to increase the amount of capital that it holds to 500m manat ($478m) up from 10m manat.
Both orders appear to be designed to preempt a sustained economic slowdown. The increase in the amount of debt that the Azerbaijani government can accrue to 4.5b manat and the rise in the Central Bank’s working capital should soften the impact of oil prices staying low.
Like the rest of the region Azerbaijan is trying to cope with a collapse in oil prices.
The price of a barrel of oil has more than halved in the past year. For Azerbaijan, whose economy is reliant on oil sales, the impact has been heavy. It has cut its budget and dropped various infrastructure projects to save cash.
Last week a fire at an internet data centre knocked Azerbaijan off the World Wide Web, highlighting just how fragile and investment-needy some of Azerbaijan’s infrastructure it.
In June, the IMF said Azerbaijan’s economy would grow by only 1.8% this year, a sharp fall from the rapid growth of a few years ago. It also said there would be sluggish growth until 2020. Mr Aliyev’s orders appear to confirm this view.
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Copyright ©The Conway Bulletin — all rights reserved
(News report from Issue No. 258, published on Nov. 27 2015)