The Uzbek Central Bank has not announced any formal currency interventions, though they are all but certain to be underway – it has stated that demand for selling rubles is nearly 10 times the demand to buy them. Tashkent’s foreign currency reserves stand at $34.4 billion – over half is in gold – roughly 60 percent of GDP.īut unlike Kazakhstan, Uzbekistan has left its baseline interest rate unchanged at 14 percent, having cut it by 100 basis points last September amid signs that efforts to tame inflation sparked by the 2017 liberalization of its currency, the sum, were finally succeeding.ĭespite the lack of interest rate action, the sum has, in contrast to the tenge, lost little of its value against the U.S. Borrowing has grown substantially since President Shavkat Mirziyoyev came to power in 2016, but foreign indebtedness is still well below Kazakhstan’s levels. Likewise, Uzbekistan has a relatively healthy sovereign balance sheet. And uncertainty reigns about Kazakhstan’s ability to export its oil the bulk of its shipments currently transit Russia. That crisis saw growth crater and prompted a break in the social contract – nepotistic rule in exchange for rising living standards – that helped seed political malaise that culminated in the bloody events this past January. Nevertheless, the tenge has lost some 20 percent against the dollar since the war began, comparable with its decline in 2015 when it abandoned its dollar peg in the face of falling oil prices. Indicating its optimism, on March 9 the National Bank said it was not lifting the baseline rate further. In short, Kazakhstan should be able to continue to manage the tenge and control its monetary policy. While the ongoing restructuring at Samruk-Kazyna could result in revelations that cast doubt on those numbers, tens of billions are known to be held with Bank of New York Mellon and are relatively liquid. The National Oil Fund reportedly holds another $60 billion or more. The Samruk-Kazyna sovereign wealth fund held some $65 billion as of January. Kazakhstan is blessed with substantial reserves. This effectively amounts to a further interest rate hike and will likely negatively impact investment, already bound to be tempered by Russia’s economic implosion and market uncertainty after Kazakhstan’s own nationwide unrest this past January. Nur-Sultan also announced a new anti-crisis plan promising further intervention in forex markets and a new “tenge deposit protection program.” Under this attempt to forestall bank runs, a 10 percent payment will be deposited into tenge-denominated bank accounts next February, tax-free. The National Bank rapidly intervened in the currency market, selling U.S. Kazakhstan was the first to respond to the crisis, raising its baseline interest rate from 10.25 percent to 13.5 percent just hours after the war began. In short, Central Asia’s economies are highly exposed to Russia. Local currencies rise and fall with the ruble. The uncertainty is gripping Central Asia, where Russia is a top trading partner and the source of critical remittances. Russia has enacted currency controls reminiscent of the early 1990’s and telegraphed plans to default on foreign debtholders. Since Vladimir Putin launched his war on February 24, the ruble has collapsed by 50 percent with no bottom in sight. Russia’s invasion of Ukraine and the Western sanctions in response have left former Soviet states in Central Asia facing economic chaos. Russia’s collapsing currency is bad news for Central Asia.
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