About the situation at the financial market in May of 2005 - National Bank of Kazakhstan

/National Bank of Kazakhstan, June 8, 05/ - Following is the full scheduled press-release of the National Bank of Kazakhstan dedicated to the situation at the republic's financial market in May of 2005 (note of IRBIS). INFLATION According to Kazakhstan statistics agency's official data inflation in May of 2005 equaled to 0.6% (in May of 2004 - 0.2%). Foodstuffs grew in price by 0.8%, nonfoods - by 0.6%, paid services - by 0.2%. In May of 2005 prices for foodstuffs grew due to growth of prices for fruits and vegetables - by 5.2%, meat and meat products - by 2.0%. Prices for eggs fell - by 5.3%, for milk - by 1.4%, for cereals - by 0.6%, for fish - by 0.3%. As regards nonfoods in May of 2005 prices for gasoline grew by 4.4% (since year beginning price fell by 3.8%). In annual expression gasoline grew by 25.9%. Besides, mazut grew by 2.8%, diesel fuel - by 2.4%, building materials - by 0.9%, prints - by 0.5%, clothes and footwear - by 0.4%. As regards paid services, public health and culture services grew by 0.3%, passenger transport - by 0.2%. Growth of prices for gas supply - by 0.3%, lodging maintenance - by 1.5% caused growth of public utilities as a whole - by 0.1%. Since the beginning of this year inflation rate equaled to 3.1% (in January- May of 2004 - 2.1%), prices for foodstuffs grew by 4.1%, for nonfoods - by 1.7%, for paid services for population - by 2.5%. In May of 2005 inflation in annual expression equaled to 7.8% (in April of 2005 - 7.3%). INTERNATIONAL RESERVES AND MONEY AGGREGATES In May of 2005 National Bank's net international reserves rose in current prices by 0.4% to $8673.8 m. Servicing of the foreign debt of the Ministry of finance, growth of the National fund's assets were partially neutralized by currency purchasing by the National Bank on domestic market. As the result, net currency reserves have fallen by $7.5 m. Assets in gold have fallen by $27.7 m. as the result of transactions made by the National Bank and growth of its price on the world markets by 3.8%. Country's international reserves as the whole i.e. including the National Fund's money (according to preliminary data $5172.6 m.) fell in May by 0.2% to $13849.2 m. Growth of National Bank's net international reserves in May caused expansion of monetary base by 0.4% to KZT549.8 bn. In April of 2005 money supply fell by 3.1% to KZT1671.8 bn. mainly due to falling of net foreign assets of the banking system and credit partnerships by 12.5%. Cash in circulation (М0) grew in April by 4.1% to KZT379.9 bn., and deposits in the banking system and credit partnerships in money supply structure fell by 5.1% to KZT1292.0 bn. Growth of cash in circulation caused falling of the stake of deposits in money supply structure from 78.9% to 77.3%. Falling of money supply volume in April caused falling of money multiplier from 3.16 to 3.05. CURRENCY MARKET In May of 2005 there was nominal devaluation of tenge against US dollar by 0.61% (from 131.61 KZT/USD by the end of April to 132.41 KZT/USD). Direction of dynamics of KZT/USD rate corresponded to the conjuncture of the world currency market. Besides, there was balance of demand and offer of foreign currency on the domestic currency market. During the month rate of tenge against dollar varied within KZT130.28 - KZT132.49 per 1 dollar. Since the beginning of the year tenge devaluated against dollar in nominal expression by 1.85%. In May of 2005 volume of stock exchange's transactions taking into account deals at additional trades grew in comparison with April by 8.1% to USD802.5 m. (since the beginning of the year - USD3.5 bn.). On the over-the-counter currency market volume of transactions grew by 4.5% to USD1807.9 m. (since the beginning of the year - USD6.3 bn.). GOVERNMENT SECURITIES MARKET In May of 2005 there was held the only auction on floatation of GS of the Ministry of finance, when 5-year MEOKAM were issued. Floatation volume was KZT16 bn. that was more by 14.3% than in April of 2004. Yield of floated 5-year MEOKAM was 4.09%. Redemption of government securities of the Ministry of finance including interest payment in May of 2005 was KZT7.9 bn. Volume of securities of the Ministry of finance in circulation equaled by the end of May to KZT303.5 bn. having increased within the month by 3.1%. Issue volume of the National Bank's notes in May of 2005 in comparison with April has grown by 10.5% to KZT195.2 bn., yield of short-term notes equaled to 2.38%. Volume of notes redemption taking into account interest payments in May of 2005 equaled to KZT190.6 bn. Volume of notes in circulation by the end of May was KZT339.7 bn. having grown by 1.9%. In May of 2005 in comparison with previous month volume of deals on the National Bank's direct repo transactions decreased by 36.8% to KZT53.3 bn. Reverse repo transactions were not held in May of 2005 as well as transactions on purchase and sale of GS of the Ministry of finance. INTERBANK MONEY MARKET In May of 2005 in comparison with previous month there was falling of banks' activity on liquid funds investing. In May in comparison with April volume of placed interbank tenge deposits fell by 11.0% to KZT105.4 bn. Weighted average interest rate on placed interbank tenge deposits grew in comparison with April from 2.16% to 2.21%. Weighted average interest rate on placed dollar deposits grew 2.21% (in April - 2.16%). In May there were placed dollar deposits for a total of USD13.0 bn., that was less by 5% compared to April. Weighted average interest rate on placed dollar deposits grew in May to 2.80% from 3.02% in April. Volumes of transactions on other types of interbank borrowings were insignificant. DEPOSIT MARKET Total volume of residents' deposits fell in April in comparison with March by 5.1% to KZT1292.0 bn. Deposits in the national currency rose by 4.2% to KZT799.4 bn., deposits in foreign currency fell by 17.1% to KZT492.5 bn. (over $3.3 bn.). As the result proportion of tenge deposits grew from 56.3% to 61.9%. Deposits of juridical persons fell by 9.5% to KZT808.4 bn., whereas deposits of physical persons grew by 3.3% to KZT483.5 bn. Population's deposits (including non-residents) rose within the month by 2.9% to KZT490.5 bn. In the structure of population's deposits tenge deposits grew by 3.4% to KZT281.7 bn., and volume of deposits in foreign currency grew by 2.2% to KZT208.8 bn. As the result, proportion of tenge deposits increased from 57.2% to 57.4%. In April weighted average interest rate on tenge term deposits of non- banking juridical persons equaled to 3.3% (in March - 2.8%), and on physical persons' deposits - 9.7%. CREDIT MARKET Total volume of the main debt on banks' credits to economy increased in April by 5.7% to KZT1716.1 bn. Credits in the national currency rose within the month by 8.9% to KZT860.6 bn., and credits in foreign currency - by 2.7% to KZT855.5 bn. As the result proportion of tenge credits grew in comparison with March from 48.7% to 50.1%. Long-term credits grew by 5.1% to KZT1141.4 bn., and short-term credits - by 6.9% to KZT574.7 bn. Proportion of long-term credits decreased from 66.9% to 66.5%. Banks' credits given to small business subjects increased within the month by 8.0% to KZT334.4 bn. Weighted average interest rate on credits in the national currency given to non-banking juridical persons fell from 14.4% to 13.6%, and to physical persons - from 20.4% to 19.9%. ROUND TABLE ON MONETARY-CREDIT POLICY On June 3 of 2005 by the initiative of USAID and the National Bank the Round table with participation of representatives of state bodies and international consultants on monetary-credit policy was held. Participants discussed increasing of efficiency of the National fund's functioning, National Bank's switching to inflation targeting principles, holding an optimal monetary-credit policy, and usage and improvement of monetary-credit policy instruments including reserve requirements. It was noted that National Bank's policy concerning inflation and exchange rate is optimal under the existing conditions of the considerable capital inflow. HARVARD UNIVERSITY'S PROFESSORS VISITING KAZAKHSTAN Within May 30 - June 2 of 2005 Rikardo Hausman and Andres Velasko professors of Harvard university visited Kazakhstan. They represent the group of consultants attracted by Kazakhstan government for working out recommendations on further development of Kazakhstan's economy. The professors represented a report "Economic growth and competitiveness in Kazakhstan: problems priorities in the sphere of macroeconomic, industrial, trade and institutional policies", during discussion of which National Bank's specialists also took part. A part of the report was dedicated to choosing of the exchange rate policy under conditions of the considerable capital inflow, where various variants of problems solution are proposed. The report outlines the absolute inadmissibility of fixed exchange rate introduction, that proves correctness of National Bank's choosing the policy of floating exchange rate. The report marks the exclusive importance of monetary-credit and fiscal policies coordination. It's especially noted that it's necessary to keep a more restrained policy by Kazakhstan Government in the sphere of state expenses. [2005-06-08]