Falling inflation stalks Central Asia

JULY 18, 2012 – Tajikistan’s Central Bank has cut interest rates to a record low to try to breathe life into its slowing economy, a problem that other countries in the region, including Kazakhstan, are facing.

A faltering global economy, driven by unease over the security of sovereign debt in the Eurozone, is impacting economies around the world and Tajikistan, on the fringes of Central Asia, is particularly vulnerable.

Tajikistan is one of the poorest countries in the region and relies on remittances for a third of its national income – the highest figure in the world.

Last week, the Tajik Central Bank slashed its interest rate to 6.8 percent from 8 percent, its fourth rate cut since December and its lowest rate since 2008 in the wake of the global economic slowdown.

In a statement, the Central Bank explained that it was trying to stem a worrying drop in inflation with the interest rate decreases. Inflation has slowed to 2.3 percent for the first five months of the year, down from 6.9 percent during the same period last year.

“The change was introduced because of a decrease in inflationary pressure and outside influences, as well as with the aim of providing an effective monetary and credit policy,” Reuters quoted the central bank as saying in a statement.

On December 20, before the first cut, Tajikistan’s interest rate had been 10 percent.

But Tajikistan is far from alone in trying to stimulate growth through manipulating its monetary policy.

Kazakhstan’s government has gently trimmed growth estimates this year and has also cut interest rates. In June the head of the Kazakh Central Bank, Grigory Marchenko, said he may cut rates for a fourth consecutive time to 5.5 percent from 6 percent if inflation continued to slow.

That hasn’t happened yet but for Kazakhstan, and other Central Asian economies, slowing inflation is becoming the defining economic statistic of the year.


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