NOV. 2 2015 (The Conway Bulletin) – Inflation in Kazakhstan grew by 5.2% in October, compared to the previous month, after businesses increased their prices on goods and services across the country to balance a devaluation in the value of the tenge currency. The tenge has now lost half its value against the US dollar since Feb. 2014. Year-on- year inflation now stands at 9.4%.
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(News report from Issue No. 255, published on Nov. 6 2015)
NOV. 5 2015 (The Conway Bulletin) – Azerbaijan’s foreign currency reserves fell 3% in September to just over $7b, media reported, highlighting just how much cash the Central Bank has spent propping up the manat. Azerbaijan’s Central Bank has now spent half its currency reserves in the past year.
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(News report from Issue No. 255, published on Nov. 6 2015)
NOV. 4 2015 (The Conway Bulletin) – Georgia’s Central Bank increased its key interest rate to 7.5%, its highest level since Sept. 2011, to try and dampen rising inflation.
In January, Georgian interest rates were 4%, demonstrating just how aggressively its Central Bank has pushed up the cost of borrowing.
In a statement, the Georgian Central Bank said that Consumer Price Inflation now measured 5.8%, pushed up by a rise in the cost of imported goods and a jump in electricity prices.
“According to the current forecast, in the beginning of 2016 the inflation will remain above its target value, will start decreasing afterwards and will return to its target value of 5% in the second half of 2016,” the Central Bank said in a statement.
This year, similarly to other cur- rencies in the region, the Georgian lari has lost around 28% of its value.
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(News report from Issue No. 255, published on Nov. 6 2015)
NOV. 5 2015 (The Conway Bulletin) — In an effort to tame inflation, Georgia raised its key interest rate by 50 base points to 7.5%
In October, annualised inflation in Georgia rallied to 5.8%, above the Central Bank’s target of 5%. Since the beginning of the year, the lari has lost over 27% of its value against the US dollar. The Central Bank intervened heavily in the currency market last month, keeping the lari steady. It sold $20m during its latest intervention on Oct. 27.
Across the Caspian Sea, the Kazakh Central Bank postponed a monthly interest rates meeting, scheduled for Nov. 6, a decision that baffled observers and made the Central Bank look amateurish.
After the sacking of former chief Kairat Kelimbetov and the appointment of Central Bank veteran Daniyar Akishev, investors and savers were eager to hear what the new chief would say at his first press conference. It looks like people will have to wait a little longer.
Instead, the Bank issued a short statement the day before the monetary policy meeting was due, saying it will no longer intervene heavily in the currency market to preserve the exchange rate, as it wants to avoid depleting its reserves. In its statement, the Bank failed to fix a date for the next monetary policy meeting.
If anyone is still wondering why everyone has lost trust in the tenge and the Central Bank, here’s why.
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(News report from Issue No. 255, published on Nov. 6 2015)
NOV. 2 2015 (The Conway Bulletin) – Kazakh President Nursultan Nazarbayev sacked Kairat Kelimbetov as head of the Central Bank, two years after he was handed the job.
He promoted 39-year-old Daniyar Akishev, a former deputy head of the Central Bank and his personal economic adviser, to take over from Mr Kelimbetov.
Under Mr Kelimbetov’s watch a combination of low oil prices and a recession in Russia has battered Kazakhstan’s economy. The tenge currency has lost around half its value since Feb. 2014.
Mr Nazarbayev said that he had lost confidence in Mr Kelimbetov. “The lack of confidence in the economy and the national currency — the tenge — should not be allowed to continue,” he said in a statement on his website. “It’s important to work to fix this poor performance.”
The Kazakh Central Bank has lost credibility over the past couple of years. It has flip-flopped on monetary policy and has spent billions of US dollars propping up its currency before defaulting first in Feb. 2014 and then in August this year.
On each occasion, events have appeared to wrong-foot Mr Kelimbetov.
In 2014, he admitted at a press conference after the devaluation that he hadn’t expected it to happen. In August he said that the tenge had moved to a free float against the US dollar before presiding over several more interventions to prop up its strength.
But news that he had been sacked failed to halt the slide in the value of the tenge. By Friday, Nov. 6, it had touched an all-time low against the US dollar of 310/$1.
Inflation data for October presented Mr Nazarbayev and his advisers with more bad news. Pushed up by the devaluation in August, inflation for the year to end-October measured over 9%.
And the disorganisation surrounding the Central Bank also appeared to continue. Shortly after it released a statement saying it would no longer spend millions of US dollars propping up the tenge, the Central Bank cancelled its monthly interest rate meeting without giving a reason or setting a new date.
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(News report from Issue No. 255, published on Nov. 6 2015)
OCT. 21 2015 (The Conway Bulletin) – Nurbek Elbayev, director of the Kyrgyz energy regulatory agency, said electricity tariffs will rise sharply over the next two years. The regulator will impose a 21% increase in August 2016 and a 29% rise in 2017. Electricity prices have risen across the region, triggering civil unrest.
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(News report from Issue No. 253, published on Oct. 23 2015)
OCT. 3 2015 (The Conway Bulletin) – The IMF said that rising inflation in Azerbaijan was a growing risk and the Central Bank said that its currency reserves had fallen to their lowest level for nearly four years, more data that points to a worsening outlook for the Azerbaijani economy.
In its World Economic Outlook, the IMF said that inflation would measure 5% this year in Azerbaijan, a reflection of the pressure prices have been under since February when the Central Bank devalued its manat currency by 33%.
And so are the Central Bank’s declining currency reserves.
These have fallen to just over $7b at the end of September from $7.3b in August, its lowest level since November 2011 when it was recovering from the 2008/9 Global Financial Crisis.
It’s been a steep, fast fall. At the end of 2014, Azerbaijan’s currency reserves were nearly double at $13.7b.
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(News report from Issue No. 251, published on Oct. 9 2015)
OCT. 7 2015, ALMATY (The Conway Bulletin) — A Kazakh government bail-out for hundreds of thousands of savers who hold tenge denominated deposits hit by a currency devaluation in August could cost the state around $420m, according to the Bulletin’s calculations.
The bail-out adds to the lengthening bill that the Kazakh state is having to foot to weather a worsening economic storm that has hit the Central Asia and South Caucasus region.
It has spent billions of dollars propping up its currency and also said that it will give handouts and tax breaks to key industries heavily effected by the economic downturn such as car-makers and smaller oil producers.
And in an effort to shore up support immediately after the devaluation on Aug. 20, President Nursultan Nazarbayev said savers would be compensated for losses incurred when the Central Bank ditched the tenge’s peg to the US dollar and allowed it to drop heavily.
Now, at a press conference in Almaty, Alexander Trentyev, director of the consumer protection department at the Central Bank, for the first time hinted at the bill that the government was facing.
“The compensation will cover the period August 18 2015 to September 30 2016. Over 1.7m accounts totalling around 250b tenge are eligible for the government aid,” media quoted him as saying.
The tenge is currently trading at around 275/$1, a drop of around 46% from its value of 188/$1 just before the devaluation on Aug. 20. This means that the 250b tenge in bank deposits will convert to 365b tenge and cost the government $420m in compensation. Of course, though, as analysts have said, the tenge could well drop further in value before Sept. 30.
But there is a flip-side for savers. Their accounts will be frozen for 13 months until Sept. 30 2016.
This measure appears to have been adopted to prevent customers from rushing to withdraw their savings and turning them into US dollars after they received compensation.
It will also keep a high level of tenge in the currency markets, a policy the Central Bank has said that it favours.
What the authorities are desperate to avoid during this period of economic turbulence is civil unrest. The bail-out of savers appears designed to ward this off.
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(News report from Issue No. 251, published on Oct. 9 2015)
OCT. 2 2015 (The Conway Bulletin) – Annualised inflation in Georgia in September measured 5.2%, the Georgia statistics service said, a small drop from August. The main driver of inflation has been a rise in the price of electricity, alcohol and cigarettes. Last month the Central Bank increased interest rates to try to beat rising inflation.
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(News report from Issue No. 251, published on Oct. 9 2015)
OCT. 7 2015 (The Conway Bulletin) — Analysts in Kazakhstan have revised their inflation expectations down to 7.1% this year after official data showed that the consumer price index grew by only 1% in September.
Halyk Finance researchers said the numbers are much more encouraging than what they forecasted. This should keep inflation within the Central Bank target of 6-8%. Central Bank chairman Kairat Kelimbetov said he doesn’t rule out the possibility of a further increase in interest rates, after a new rate was set at the end of last week.
The Eurasian Development Bank (EDB) said in a report that Kyrgyzstan’s economy is poised to grow by 1.8% this year. This came after PM Temir Sariyev disclosed more optimistic numbers, pointing out that in Jan.- Sept. 2015, the country’s economy grew by 6%. The EDB said it expects a marginal slowdown in economic activity in Q4 2015.
The IMF has dramatically increased its forecast for Azerbaijan’s growth in 2015, from a meagre 0.6% in April to 4% in its latest report.
The international lender also revised inflation expectations downwards from 7.9% to 5% for 2015, more good news.
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(News report from Issue No. 251, published on Oct. 9 2015)