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Kyrgyzstan & Uzbekistan News

This Section is contributed by Kazkommerts Securities

November 23, 1998

Latest Kazakhstan Weekly News

o The official Som/Dollar exchange rate fell to 31.2022 on the latest currency auction of the National Bank of the Kyrgyz Republic on 20 November 1998. (Reuters)

o According to preliminary arrangements between the Kyrgyz Government and the International Monetary Fund (IMF), the latter will allocate USD 11m to support the country's balance of payments next year. This information was released to journalists by Kyrgyzstan's Prime Minister Zhumaliev. He said that this sum will partially compensate for Kyrgyzstan's losses due to the impact of the Russian crisis. The IMF estimates these losses at USD 35-38m. (Reuters)

o The major event in the republic is the free fall of the national currency, the Som. It has dropped 30% over the past two months. "Kyrgyzstan has really felt the global market's cold breath," the Finance Minister said at a briefing. According to him, the country's economy and national currency were also affected by decreasing financial grants from the Japanese Government and by shrinking commodity aid from the USA. In the opinion of the National Bank's Chairman, Marat Sultanov, the major reason for the soaring Dollar rate last week was the sharp increase in imports, mostly petrol products from Russia. (Argumenty i Fakty Kazakhstan)

o Kyrgyzstan should revise its excise taxes to replenish the state budget and to make repayments of its external debt, said the Chairman of the National Bank, Marat Sultanov, at a session of the Kyrgyz Parliament's upper house. He suggested that taxes on gold, diamonds, alcoholic drinks, and gasoline be raised significantly. In particular, he thinks that the excise on high-quality gasoline should be doubled, as more is being imported and since wealthy people consume this product. According to Sultanov, Kyrgyzstan's balance of payments lost USD 32m in the 3Q 1998 due to duty free trades in the Bishkek free economic zone. In 1999, Kyrgyzstan is supposed to repay USD 60m and in 2000—USD 70m of its foreign debt while the amount of foreign aid will be reduced to USD 40m by the year 2000. The country's external debt totals USD 1.3bn and the Som has lost 60% of its value since the beginning of 1998, thus making foreign debt servicing much more expensive. (Reuters)

o Last Thursday, the average yields on T-bills rose dramatically due to a lack of Soms at commercial banks and increased volumes of short-term paper issues. The average yield on 3-month T-bills increased to 144.76% from 74.35% on the previous auction. The average yields on 6- and 12-month T-bills increased, respectively, to 81.26% from 78.0% and 98.70% from 86.97%. After the Lombard rate was raised from 70% to 84% on 12 November 1998, the repo rates increased to 100% and more from 80-90%. (Reuters)

o According to its head, the National Bank of Kyrgyzstan intends to establish the refinancing rate every week depending on the T-bill rates' results on the latest auctions. In addition, the bank will limit Lombard crediting while it enhances repo operations in order to calm down the rush and to stabilise interest rates. (Reuters)

o The National Bank of Kyrgyzstan has adjusted its policies in reaction to the currency market crisis and has made the protection of the national currency a priority instead of retaining its gold and currency reserves. According to the bank, its international reserves decreased to USD 175m from USD 198.5m at the beginning of the year. However, as Chairman Marat Sultanov said, the current gold reserves can maintain the Som rate and can meet any of the economy's currency requirements. At present, the country's money base totals 2.8bn Som (USD 119.9m) and its money mass is 4.7bn Som or USD 201.3m. (Reuters)

o On 17 November, the Central Bank of Uzbekistan reduced the official Sum/Dollar rate to 108.08/USD from 107.71 on the previous week. (Reuters)

o The International Finance Corporation (IFC) may double investments in the Uzbek private sector (from the current USD 40m) provided that market reforms continue in the country, IFC's Vice President of Finance, Jemal Kassum, said at a press conference in Tashkent. Further IFC investments will be focused more on small and medium-sized business and will depend on the general investment climate and progress in reforms. As of the end of September 1998, the IFC had apportioned USD 31.3m in loans and invested USD 7.7m in eight projects in the Uzbek financial and agricultural sectors. (Reuters)

o Uzbekistan's monthly consumer price inflation accelerated in October to 3.1pp compared with 1.1pp in September, according to the State Statistics Committee. (Reuters)