Kazakhstan raises key interest rate to 16%

Kazakhstan’s currency, the tenge, has the ignominious honor being the world’s most volatile currency this year after the free-float shift in August caused a record devaluation of some 23%. The governor of the Central Bank, Kairat Kelimbetov, has struggled to keep the value relatively stable since the devaluation, using the overnight repurchase rate as a benchmark interest rate. This was raised to 16% today, which will likely discourage banks from borrowing to buy dollars, and raises the attractiveness of the tenge comparatively.

The higher interest rate, however, comes at a time of slow growth for the Kazakh economy, which expanded only 1.7% in the second quarter of 2015, the slowest since 2009. With annual inflation rising as well, it is in the country’s best interest, according to most, to stabilize the currency immediately and then proceed to incentivize growth in other areas of the economy. Consumer price growth is quickly accelerating, indicating that inflation will rise in tandem.

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News Briefs:

  • The OSCE has condemned the growing violence between Azerbaijan and Armenia in Nagorno-Karabakh, which has reached the highest level of intensity since the signing of the 1994 cease-fire. Both sides are reportedly using mortars and other heavy weaponry, not just small arms, according to the OSCE’s Minsk Group, which has been tasked with mediating a solution to the conflict. In tandem, Azerbaijan has made an address to the UN General Assembly, volunteering itself as the solution to the West’s energy problems, and saying “Azerbaijan has become one of the crucial players in the world’s global energy market,” citing the Southern Corridor gas project.
  • Ukraine has released its balance of payments data for August, which, strangely enough, has painted a largely reassuring picture of the country’s economy. It shows that exports are largely increasing, and National Bank of Ukraine (NBU) reserves are rising, with the finance ministry reporting some $2.2 billion in the Treasury in assets. The NBU has said that by the end of the 4th quarter of 2015, Ukraine will be growing again as an economy.
  • A bondholder vote on the Ukrainian debt issue has been scheduled for October 14, and Russia has been invited to join the proceedings. The debt’s maturity comes on December 20 of this year, meaning a full repayment of the principal is expected, requiring an enormous amount of capital to be withdrawn from Kiev’s state treasury. With many of the privately held debt issues retired in September and October of this year, it leaves only the Russian-held issue with the potential to be in arrears.
  • Turkmenistan has sent a delegation to an international human rights and democracy conference for the first time in about 12 years, and for the first time in the Berdimuhamedow regime. The conference, known as the “Human Dimension Implementation Meeting” hosted by the OSCE, treated the Turkmen delegation in such a way that it issued a very harshly worded press release shortly afterwards, stating that “certain people at the conferenced indulged in a range of subjective, provocative attacks and comments about Turkmenistan with the clear aim of putting psychological pressure on members of the Turkmen delegation.”
  • Uzbekistan has repatriated its highly-enriched uranium (HEU) to Russia from a research facility in Tashkent with cooperation from the International Atomic Energy Agency (IAEA) and the US Department of Energy’s National Nuclear Security Administration (NNSA). In contrast to LEU (Low-Enriched Uranium), which is being transferred to Kazakhstan’s LEU Bank, supported by the IAEA, HEU is being transferred to Russia for disposal as nuclear weapon production is ramped down based on the terms of nuclear treaties with NATO and the United States.
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