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Weekly E-Bulletin 03.05.2016-09.05.2016 No 66

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Weekly E-Bulletin 03.05.2016-09.05.2016 No 66 03.05.2016-09.05.2016 • No: 66 THE CURRENT SITUATION OF THE DEPOSIT MARKET OF KAZAKHSTAN Theoretically, deposits are the best In the beginning of 2014, the deposits in 2015, 78.9% (44.0% in the beginning of source of funding for the banks in terms foreign currency were accounted for 2014) of individuals’ deposits was in of availability and cost. Due to the sig- 37.4% (3.77 trillion tenge out of 10.09 foreign currency, while nonbanking legal nificant developments in financial mar- trillion tenge) in total banking sector’s entities’ foreign currency deposits were kets in 1990’s and 2000’s, the share of deposits, while at the end of 2015, the accounted for 60.7% (33.2% in the be- deposits in banks’ funding slightly de- share of these deposits in total banking ginning of 2014) in the total banking creased. However, after 2008 global sector reached 68.99% (10.45 trillion sector deposits. financial crisis, this type of funding tenge out of 16.48 trillion tenge). These As shown above, nonbanking legal regained its position in banks’ liabilities data show high dollarization of the de- entities’ foreign deposits share in the over the world. Kazakhstan’s banking posits, and the reason of this dollariza- total banking sector deposits was lower sector faced the same situation. For tion was not only low oil prices but also than individuals’ foreign currency depos- instance, between 2005-2007, in average, the unwillingness of the NBRK to in- its, and the reason for this is the fact that the share of deposits in banks liabilities crease the threshold for the interest rates banks were able to change their interest was 61%, while between 2013-2015, this of personal deposits. The personal de- rates on non-banking legal entities de- ratio was 73.6%. This data shows that posits are accounted for 42.6%, in the posits. For example, from January 2014 deposits are the main funding source in total banking sector’s deposits at the end to December 2015, non-banking legal the banking sector, gaining more im- of 2015. entities’ average interest rates on depos- portance in recent years. However, the The NBRK controls the interest rates on its in terms of tenge increased from 4.8% high dependence on only one funding personal deposits by the Kazakhstan to 19.9%, while the rate of the individu- source may increase banks’ liquidity deposit insurance fund (KDIF), which is als’ deposits in terms of tenge for the risks. These risks, which actually oc- its subsidiary company. The fund guar- same period increased from 6.4% to curred between 2014-2015, caused bank- antee all of the personal deposits, which 8.0%. Because of high demand for per- ing system to suffer from the liquidity do not exceed 10 million tenge. Howev- sonal deposits in foreign currency, their shortage. er, in order to be a member of this fund, average interest rate decreased from In the second half of 2014, the oil prices banks need to carry certain criteria, and 4.2% in the beginning of 2014 to 2.9% at started to decrease and slumped to $50 one of which is not to accept deposits the end of 2015, while the average rate per barrel in the beginning of 2015, with an interest rate higher than the rate for non-banking legal entities’ foreign suggested by the fund. In 2015 and while in the middle of 2014, the oil currency deposits decreased from 2.6% partly in 2014, the KDIF did not increase prices were $110 per barrel. This factor to 2.1% for the same period. its suggested rate, which was 10.5% affected the country’s current account In January 2016, the KDIF increased (annual effective interest rate). However, balance, which also negatively affected suggested interest rate from 10.5% to at that period, other investment instru- 15%, which along with decreased specu- the national currency. However, at that ments significantly increased their inter- lative sentiment that would help the time, the National Bank of the Republic est rates (REPO, currency non- banks to decrease the share of the foreign of Kazakhstan’s (NBRK) was imple- deliverable forward, currency swaps). currency deposits. As for March 2016, menting the currency peg policy, which For example, 1-week KZT/USD NDFs the share of deposits in foreign currency did not allow the currency to depreciate. (non-deliverable forward) rate was high- was accounted for 63.4% in the total Despite the decline in the oil prices, the er than 30% during the second half of banking sector’s deposits, while the NBRK kept the currency rate stable, and 2014 and 2015, which means that house- share of personal deposits in foreign committed to continue to implement this holds expected that tenge devaluation currency decreased from 78.9% to monetary policy in order to prevent would be higher than 30%. The NDF’s 74.9%. The average interest rates on households’ speculative sentiment to rate clarifies why people prefer to con- deposits in terms of tenge for individuals gain a profits from the currency devalua- vert their national currency into foreign increased from 8.0% to 11.8% since tion, by converting their investments currency instead of holding it in national January. (deposits, securities, and cash), which currency deposit with interest rate of The appreciating tenge and the KDIF’s were in terms of national currency into 10.5%, because even without no return relief measures may have a positive the investments, which were in terms of of interest, investments in foreign cur- effect on the deposits de-dollarization. foreign currency. In spite of the NBRK’s rency will gain value just due to the The de-dollarization will increase banks’ commitment, the public’s speculative tenge devaluation. Therefore, most of the lending to the economy, by improving sentiment was increasing and most of the individuals converted their national banks liquidity, which is an important households’ savings were converted into currency deposits into foreign currency step to overcome the economic crisis. the foreign currency investments. deposits. For example, as for the end of Written by Daniyar Nurbayev, Eurasian Research Institute, Kazakhstan bekistan. To date, the Kandym pro- Politics, Foreign Affairs and Security and exports fell by 29% and 11% re- ject has already received investments spectively. • On the sidelines of the meetings held exceeding $3.6 billion. Lukoil jointly • The Fitch Ratings agency downgrad- by Visegrad Group (Czech Republic, with the Uzbek National Holding ed Kazakhstan's credit rating from Hungary, Poland and Slovakia) and Company Uzbekneftegaz launched BBB+ to BBB. The Fitch Ratings the Eastern Partnership countries in the Kandym project in 2004. The reported that low oil prices led the Prague, the Minister of Foreign Af- natural gas production by Lukoil in government debts increase to 22.1% fairs of Azerbaijan, Elmar Mam- Uzbekistan is planned to reach 6 bil- of GDP in 2015, compared to 13.9% lion cubic meters in 2016. madyarov, stated the opportunities in 2014. • The State Oil Fund of Azerbaijan for further strengthening cooperation • According to the Head of the State between Europe and Azerbaijan. reported that it has issued $22.6 mil- lion to fund construction of a new Customs Committee (SCC) of Azer- • During his official visit to Moscow, baijan, Aydin Aliyev, the customs the Deputy Minister of Foreign Af- generation floating drilling rig in revenues in the state budget for the fairs of Iran, Hossein Amir-Abdol- Azerbaijan in the first quarter of lahian, and the Special Envoy for the 2016. The total $718.6 million of first four months of 2016 amounted Middle East and Africa, the Deputy $1,117 billion has already been is- to 644 million manats, which ex- Minister of Foreign Affairs of Rus- sued since the project was launched. ceeded the forecasts by 23%. Over- sia, Mikhail Bogdanov, discussed the The new rig can be commissioned in all, the forecasts on customs reve- Syrian conflict settlement and the early 2017. The rig will be used for nues in the state budget of Azerbai- progress of intra-Syrian negotiations. drilling of prospective structures and jan in 2016 is planned to reach 1.81 • During his official visit to Astana, fields in Azerbaijan, such as the billion manats. the member of the Political Bureau Umid field, Babek, Karabakh, Ash- • According to the Statistics Commit- of the Communist Party of China, rafi and others. tee of the Ministry of National Econ- the Secretary of the Party Committee • The Ministry Oil and Gas of Turk- omy of Kazakhstan, the inflation of the Xinjiang Uygur Autonomous menistan announced the country’s measured by consumer price index Region (XUAR), Zhang Chunxian, plans to increase the production of has reached 3.6% since early 2016. and the First Deputy Prime Minister natural gas to 83.8 billion cubic me- The inflation in the country stood at of Kazakhstan, Bakhytzhan Saginta- ters in 2016, which is 9% more than 0.6% in April 2016. The prices for 2015. Considering China to be the yev, discussed trade and economic food products, non-food products main market for its natural gas ex- issues, industrial and innovative co- and paid services rose by 0.7%, 0.8% operation, cooperation in transport ports TurkmenNefteGazStroi began the construction of a compressor sta- and 0.4% respectively. The year-on- projects and agriculture between Ka- year inflation for April 2016 reached zakhstan and XUAR. tion with a projected capacity of 30 billion cubic meters per year at the 16.3%. • The President of Azerbaijan, Ilham Aliyev, signed an order on measures Malai natural gas field, which is a re- Society and Culture to eliminate the damage for civilians source base of the Turkmenistan – • The 14th International Culture and as a result of the recent escalation in China pipeline.
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