DEC. 11 2015 (The Conway Bulletin) – A court in Bishkek sentenced Dilger Zhaparov, head of the state-owned gold miner Kyrgyzaltyn, to three years in jail because of an unauthorised payment he made to Centerra Gold. Centerra Gold has denied any wrongdoing.
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(News report from Issue No. 261, published on Dec. 20 2015)
DEC. 16 2015 (The Conway Bulletin) — London-listed Tengri Resources said two mines it has been exploring in Kyrgyzstan “host large resources with significant upside exploration potential” but that it won’t exploit them because of low commodity prices. Tengri Resources’ shares fell 17.4% to 3p, a 9 month low, after the announcement. The company had been exploring the Taldybulak and the nearby Andash mines. Gold prices have fallen by 11% this year and copper prices by 25%.
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(News report from Issue No. 261, published on Dec. 20 2015)
DEC. 11 2015 (The Conway Bulletin) — A court in Kyrgyzstan sentenced Dilger Zhaparov, former head of state-owned gold miner Kyrgyzaltyn, to three years in prison for corruption, after he made an unauthorised payment to Toronto-listed Centerra Gold.
Zhaparov has been in jail since May 2014, when he was arrested.
According to the prosecution, in December 2013 Zhaparov illegally withdrew funds from Kumtor Gold Company (KGC), a holding company operating the Kumtor gold mine, to pay a $200m dividend to Centerra Gold. The court in Bishkek agreed and gave him the maximum three year jail sentence.
During the trial there was never any suggestion of wrongdoing by Centerra Gold and John Pearson, vice-president of Investors Relations at Centerra Gold, said he was disappointed by the jail sentence as he thought the transaction was legal.
“We are puzzled by the decision of the Kyrgyz authorities. The payment was perfectly legal as it was an inter- company dividend payment between KGC, which is a wholly owned subsidiary of Centerra, and Centerra itself,” Mr Pearson told The Bulletin.
Kyrgyzaltyn owns 32.7% of Centerra Gold. Centerra Gold, in turn, owns 100% of KGC.
When Zhaparov was arrested, the authorities said the payment needed government approval.
The Kyrgyz authorities have repeatedly rowed with Centerra over KGC’s ownership. The Kumtor gold mine is Kyrgyzstan’s most valuable asset, making up 10% of its GDP.
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(News report from Issue No. 261, published on Dec. 20 2015)
DEC. 11 2015 (The Conway Bulletin) — The Kazakh tenge keeps hitting record lows against the US dollar, trading around the 310/$1 mark in the second half of this week, and there is little indication that it will reverse this trend. The Central Bank has said it wants to scrap its previous monetary policy and find new solutions. The message it sent was, in essence: “we will play it by ear.” So much for restoring confidence in its monetary policies.
The Kyrgyz som stopped its fall and found its equilibrium at 75.6/$1 this week, the first stable week in months.
All other currencies were steady this week.
Next week, the US Federal Reserve Bank will hold a policy meeting. Analysts are bracing for the first interest rate rise since 2009.
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(News report from Issue No. 260, published on Dec. 11 2015)
DEC. 9 2015 (The Conway Bulletin) – Kyrgyzstan’s Central Bank changed the reserve requirements for its commercial banks to reflect the less stable state of the Kyrgyz som. It reduced the proportion of minimum reserves held in som by 4.5% to 4% of a bank’s total reserves and also increased the requirement to keep 12.5% of the bank’s cash in foreign currency, up 2.5%.
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(News report from Issue No. 260, published on Dec. 11 2015)
DEC. 11 2015 (The Conway Bulletin) — Oil prices fell by almost 10% to under $40/barrel this week — its lowest price since 2009. This hit several of the region’s energy companies who were already dealing with a sharp slump in their share prices.
Tethys Petroleum closed at 4.38p on Thursday, down 2.7% in one week. Roxi Petroleum continued to decline, closing at 6.38p on Thursday, down 8.9% on the week. Nostrum Oil & Gas shares lost 3% to close at 369.5p.
Commodity companies were hit by the general downturn in the market and the news of giant miner Anglo American scaling down operations dramatically. Gold prices fell again by 2% this week, hitting $1,067/ounce.
This affected Kazakhstan-focused mining companies such as Central Asia Metals and KAZ Minerals, which lost 8.9% and 3.8% respectively this week. Kyrgyzstan-focused miner Centerra Gold surged 4%in the Toronto Stock Exchange to 7.94 Canadian dollars, against the trend of other companies, perhaps rallying on its positive results in the first three-quarters of the year.
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(News report from Issue No. 260, published on Dec. 11 2015)
DEC. 10 2015 (The Conway Bulletin) – Remittances to Kyrgyzstan were 30% lower in the first 10 months of the year compared to the same period in 2014, said the head of the Central Bank, Tolkunbek Abdygulov. This shortfall, triggered by a recession in Russia and a fall in the value of the som, has blown a $400m hole in the national budget.
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(News report from Issue No. 260, published on Dec. 11 2015)
DEC. 4 2015 (The Conway Bulletin) -The IMF gave Kyrgyzstan a $13m grant after a generally positive review of its economic progress since a credit arrangement was agreed earlier this year.
Kyrgyzstan’s government, under pressure from a regional economic downturn, will welcome both the grant and the positive IMF review.
“The Kyrgyz authorities have managed successfully to keep the program largely on track despite that the economy continues to face adverse external and domestic shocks,” the IMF said in a statement.
In May, the IMF approved a so called-Extended Credit Facility for Kyrgyzstan. This, in short, meant that Kyrgyzstan would receive $92.4m over the next three years if it stuck to a tight fiscal regime that reigned in public spending, improved tax collection and targeted inflation through its various monetary policy levers.
The deal also meant a twice- annual report by the IMF on Kyrgyzstan’s progress. These reports would form the basis of whether the next tranche of the IMF’s phased grant could be released to Kyrgyzstan.
And this latest report means that the next $13m can be handed over.
“Monetary policy will remain on a tightening bias to contain inflation pressures,” the IMF said in its report.
“The Central Bank will also continue to pursue a flexible exchange rate policy to safeguard foreign exchange reserves and preserve competitiveness, with interventions limited to smoothing short-term fluctuations.”
Kyrgyzstan’s Central Bank has been spending heavily to maintain the strength of its currency.
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(News report from Issue No. 260, published on Dec. 11 2015)
DEC.11 2015 (The Conway Bulletin) – Foreign Direct Investments (FDI) are picking up again in the South Caucasus and Central Asia. After a difficult year hooked around the fall in the rouble and the drop in oil prices, investors have appeared to regain confidence in the economies of Central Asia and the South Caucasus. Or at least they have decided to just get on with it and deal with the economic downturn.
At least this is what the numbers show.
In Armenia FDI, measured by Central Banks as inflow minus outflow, reached $260m in the first 9 months of the year, a 17% increase compared to the same period last year.
In Georgia, although down 17% compared to the first three quarters of 2014, FDI grew progressively throughout the year, to reach just above $1b at the end of September.
Kyrgyzstan, which saw a surge of FDI in the first half of the year, might be on track to keep the trend going due to renewed confidence in the country’s extractive sector.
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(News report from Issue No. 260, published on Dec. 11 2015)
DEC. 10 2015 (The Conway Bulletin) – Uzbekistan once again formally complained to the OSCE, Europe’s security and democracy watchdog, about plans by Kyrgyzstan and Tajikistan to build new dams on the upstream river system
The complaint is a reminder of Uzbekistan’s opposition to hydro- power development in Central Asia’s upstream water system.
The Tajik and Kyrgyz governments see building new dams and hydro- power systems as essential for their countries’ development, and specific to meeting new power demands from Pakistan who they will serve through the CASA-1000 project. Uzbekistan sees the hydro- power systems as a threat to its cotton industry and agriculture.
CASA-1000 is the $1b World Bank- backed project for Kyrgyzstan and Tajikistan to generate electricity to export to Pakistan, via Afghanistan. This project hinges on a series of new dams being built in Tajikistan, including the Rogun Dam on the Vakhsh River, part of the wider Amu Darya system.
Relations between Uzbekistan and Kyrgyzstan and Tajikistan have become so strained in the past over the issue that at times it has threatened to destabilise the region.
With the final deal on CASA-1000 signed in Istanbul earlier this month, relations between Uzbekistan and its upstream neighbours are likely to become more strained, as this latest complaint appears to forewarn.
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(News report from Issue No. 260, published on Dec. 11 2015)