The deals with the private sector done, Ukraine is now scrambling to renegotiate its sovereign debt with other governments, most notably Russia. Additionally, Kiev’s Finance Ministry are working to provide currency swap lines to boost the country’s emergency cash reserves for the coming months (neatly coinciding with the return of gas debt talks with Russian Energy Minister Alexander Novak on April 14). Last month, the $5.6 billion in dollar reserves could barely cover the one month’s worth of gas imports. The IMF stated that is goal is to raise Kiev’s cash reserves to some $18 billion by the end of the year. However, the IMF’s own prognosis of the situation is decidedly negative – much of this stems from any future economic and growth outlook given the presence of separatist rebels in the East and continued fighting.
Russia has notably refused to join the debt restructuring negotiations. Russia’s Finance Ministry reported no official contact with Ukraine about the renegotiation of roughly $3 billion in Eurobond debt, which mature in December. Despite the fact that negotiations between Kiev and Franklin Templeton (the largest holder of Ukrainian debt) were successful, Russia holds the second largest amount in December 2013 after Yanukovych rejected an association agreement with the EU, sparking the Maidan protests. Ukraine’s ambition to restructure all external sovereign debt incurred before March 2014, and while most report sending representatives to these negotiations, Russia has denied receiving any invitation.
The Russian finance ministry released a statement expressing its indignation about being grouped with private sector debtholders like Franklin Templeton, saying “We have no obligation to be in one wagon with those creditors who purchased Eurobonds on the secondary market at a price that was far from the nominal price. Those creditors can be much more flexible and can afford different options. We don’t have the opportunity to work with different options.”
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- The Turkmen Economy and Development Ministry reported a staggeringly enormous GDP growth rate of 10% in the first quarter of 2015. Volumes of investments aimed at development rose 5.2% year-on-year, and salary growth was around 10%. The Ministry’s report mentioned that the decision was made to diversify into textiles and construction instead of solely oil and gas. However, the Turkmen manat was heavily devalued at the beginning of the year, and it is suspected that the real growth rate versus the nominal one would tell a different story of flagging growth and declining overall consumption.
- In Astana, Kazakh citizens organized demonstrations on the sharp rise in mortgage payments endured by the populace. The demonstrators demanded that President Nazarbayev support their efforts to renegotiate hard currency mortgages, as most of them say they cannot afford to pay off their loans. Most blame the devaluation of the tenge last February, when its value declined some 20%. However, this is likely due to the extreme inflation of the value of the tenge currently, especially in comparison to the ruble and other Central Asian currencies. Regardless, this decline in purchasing power has resulted in the Central Bank approving some 135 billion tenges for mortgage relief in mid-May.
- Kyrgyzstan has now marked some five years since a revolution in 2010 when its authoritarian President Kurmanbek Bakiev was overthrown. Current President Almbazbek Atambaev said that it was only thanks to the uprising five years ago that it was possible to establish a parliamentary democracy, which he noted was the only one in Central Asia.
- It marks exactly one year since the Afghan Presidential elections, and yet most formal semblances of government are notably absent. President Ashraf Ghani’s recent decision to suspend all provincial governors and police chiefs has also led to a stagnation of governance across the country. Many reformist MP’s have accused Ghani of his alliancemaking with militias, whom she ridiculed as “a bunch of mujahidin.” Additionally MP’s point to the problematic power sharing arrangement with Abdullah Abdullah, which they say has deteriorated and led to a difficulty understanding who has authority to solve various problems.
- On Tuesday, the Duma stripped immunity from Ilya Ponomaryov, an opposition lawmaker. The accusation is embezzlement, but speeches before the vote criticized Mr. Ponomaryov for everything from lack of patriotism to a shabby appearance. My. Ponomaryov has been in the US since last August and said that he was unsure if he would return to Russia.
- The bottleneck issue for the expansion of Oyu Tolgoi underground copper mine has been approved by Prime Minister Saikhanbileg “in principle,” breaking a deadlock in negotiations that has dragged on for almost two years. The second phase of the Oyu Tolgoi mine will result in some $4.2 billion in investment in Mongolia, and foreign direct investment, which fell last year thanks to the issue with the mine and the declining demand for the commodities sector generally, might signal a turnaround for the Mongolian economy.
- Sergey Aleksashenko at the Brookings Institute on his projections for Russia’s economy into 2050, citing its negative demographic trend despite active immigration into the country, rising mortality rates of males, and declining foreign labor due to the depressed outlook for the Russian economy in 2015 and going into 2016. He says the most important trends for the overall health of the Russian economy will be based in the changes in its labor market. He points to demographic and economic changes in the CIS as the largest indicators of changes in labor markets. Read the entire report here.
- Turkish President Recep Tayyip Erdogan came to Tehran to meet with Iranian President Hassan Rouhani right after the deal on a nuclear framework with the P5+1 Power and is being hailed as the first indicator of how the end to Iran’s isolation is beginning to recalibrate regional balances, eroding the relative power of Saudi Arabia and obtaining investment from China and the West. Turkey was likely looking for more competitive natural gas and oil pricing for its imports, taking advantage of the significantly weaker position of exporters to secure long-term savings and hedge against a rise in the value of the commodities market.
- The Afghan Taliban reported in a media statement that its leader, Mullah Omar, is still alive and well. The news release was a commemoration of its 19 years of “leadership” of Afghanistan. Mullah Omar has not appeared in public since the US invasion in 2001, after which the US has placed progressively higher and higher bounties on Omar’s head.