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National Bank of Kazakhstan Predicts Higher 2025 Oil Prices Than Bank of America

The National Bank of Kazakhstan (NBK) has revised its forecast for 2025 oil prices, lowering the projected cost from $82.5 to $70 per barrel. Despite this adjustment, the NBK remains more optimistic than Bank of America, which recently reduced its 2025 oil price forecast to $65 per barrel. Bank of America’s Forecast Initially, Bank of America analysts projected Brent oil prices at $80 per barrel for 2025, aligning closely with the NBK's earlier forecast of $82.5. However, last week, Francisco Blanch, head of global commodities and derivatives research at Bank of America, announced a significant revision, citing oversupply and reduced demand driven by the global shift toward cleaner energy sources and transportation. The new forecast sets oil prices at $65 per barrel. NBK’s Adjusted Outlook In its updated Monetary Policy Report, the NBK revised its oil price forecast for 2025 to $70 per barrel, compared to an average of $80.3 in 2024. The adjustment reflects weaker anticipated demand from China and OECD countries, coupled with slower global economic growth. The NBK noted that "the relaxation of production restrictions by OPEC+ countries starting in 2025, alongside increased output from North and South America, will likely create a supply surplus in the oil market." External Influences The U.S. presidential election results could also impact global oil dynamics. President-elect Donald Trump and his administration have pledged to sharply increase domestic oil production beginning in January 2025, aiming to reduce petroleum prices. Additionally, Trump has suggested a potential withdrawal from the Paris Climate Agreement, which could further incentivize support for U.S. oil companies. For Kazakhstan, declining oil prices present significant fiscal challenges. According to the Ministry of Finance, the country collected 655.2 billion KZT ($1.2 billion) in mineral extraction tax (MET) from oil companies during the first 11 months of 2024. Oil export revenues contributed approximately 2 trillion KZT ($3.8 billion), bringing total budget revenues from the oil sector to over 2.3 trillion KZT ($4.4 billion) this year. The potential reduction in oil prices could, therefore, have a substantial impact on Kazakhstan’s economy, particularly on its budgetary revenues derived from the oil industry.

Finance Banking Infrastructure Economic Growth Infrastructure Development EDB Investment Projects

EDB Supports Construction of Strategic Highway in Kyrgyzstan

The Eurasian Development Bank (EDB) has pledged up to $200,000 for a preliminary feasibility study for the Bishkek - Kuntuu - Belogorka - Suusamyr highway. This alternative route aims to connect Kyrgyzstan’s capital, Bishkek, with the southern and western regions of the country. An agreement for technical assistance was signed on December 5 between the EDB and Kyrgyzstan’s Cabinet of Ministers. Strategic Importance The proposed highway is expected to have significant strategic, economic, and social benefits for Kyrgyzstan. Beyond improving transport infrastructure, it will facilitate access to mineral deposits and create new employment opportunities both during construction and operation. Nikolai Podguzov, Chairman of the EDB Management Board, emphasized the project’s importance: “This initiative is part of the Eurasian Transport Framework, a key investment mega-project. It aims to strengthen transport connectivity among Kyrgyzstan’s economic centers while increasing the transit potential of Kyrgyz highways and attracting greater interest in road transportation through Kyrgyzstan from neighboring countries.” Alleviating Traffic and Economic Growth Deputy Minister of Transport and Communications Bekzhan Rysmendeev highlighted the project’s role in addressing existing infrastructure challenges. “The Bishkek—Osh highway, Kyrgyzstan’s main arterial road, currently handles 5,000 to 18,000 vehicles per day and is struggling to accommodate the growing traffic flow,” he explained. The new highway is set to reduce the travel distance by 164 kilometers compared to the existing route, providing an alternative pathway to southern regions and improving access to mining areas. “This public-private partnership project will ease congestion on the Bishkek—Osh route, contribute to economic and social development, and foster international and domestic tourism and trade,” Rysmendeev added. Regional Connectivity As part of the EDB’s broader mission to invest in Eurasia, this project aligns with the bank’s goals of enhancing regional connectivity and economic development. The EDB, a multilateral development institution, includes Armenia, Belarus, Kazakhstan, Kyrgyzstan, Russia, and Tajikistan as its member countries.

EDB National Bank money Currency Economy Banking Finance

EDB Forecasts Strengthening of the Tenge in 2025

The Eurasian Development Bank (EDB) has projected a strengthening of Kazakhstan’s national currency, the tenge, in 2025. This forecast was presented by Aigul Berdigulova, a senior analyst at the EDB’s Country Analysis Center, during the bank’s macroeconomic outlook for the Eurasian Economic Union (EAEU) member states. Exchange Rate Outlook The tenge’s exchange rate has been under significant pressure, depreciating from 495 KZT per U.S. dollar in mid-November to 523.58 KZT by December 5, according to Kazakhstan’s National Bank. Exchange offices have reported rates as high as 525 KZT per dollar. The National Bank attributes this decline to external factors, such as fluctuating global commodity prices - critical to Kazakhstan’s export economy - and the weakening of the Russian ruble, a key trade partner’s currency. Internal factors, including heightened demand for foreign currency, have further contributed to the tenge’s volatility. To stabilize the market, the National Bank intervened with $1.2 million from the National Fund in November. Despite these challenges, EDB analysts anticipate a rebound in 2024 and beyond. “We believe the current volatility in Kazakhstan’s currency market is temporary,” said Berdigulova. She emphasized that the National Bank and government are employing timely measures, including mandatory sales of 50% of foreign currency earnings by quasi-governmental entities and increased transfers from the National Fund. The EDB forecasts the average annual exchange rate in Kazakhstan to reach 486 KZT per dollar in 2025, a slight depreciation from the projected 466 KZT per dollar in 2024. By 2026-2027, the tenge is expected to stabilize at around 497 KZT per dollar. Inflation and Monetary Policy High inflation remains a concern. The EDB predicts inflation in Kazakhstan will decline to 7.3% by the end of 2025, hindered by rising tariffs for housing and utilities. To manage inflation, the National Bank is likely to maintain a high prime rate, above 15%, through the first quarter of 2025. However, as inflationary pressures ease, the rate may decrease to 11.25% by late 2025. External Influences and Oil Revenues Marina Sobolevskaya, head of the EDB’s Country Analysis Center, acknowledged that the Russian ruble's depreciation would continue to impact the tenge, with the ruble expected to weaken from 92.5 per dollar in 2024 to 104 per dollar in 2025 and 107 per dollar by 2027. On the other hand, Kazakhstan’s currency could gain support from increased oil production, particularly from expanded operations at the Tengiz oil field. Higher exports and foreign currency inflows could mitigate currency fluctuations in the domestic market. Short-Term Recovery The possibility of a short-term recovery for the tenge was also suggested by Murat Temirkhanov, an advisor at Halyk Finance. He attributed recent volatility to a surge in demand for dollars, driven by sanctions-induced ruble depreciation. Temirkhanov argued that the tenge-dollar exchange rate’s sensitivity to the ruble is overstated, given the relatively small share of ruble settlements in Kazakhstan’s foreign trade. Halyk Finance estimates the tenge’s current exchange rate of 525 KZT per dollar is above its fundamental value, which should be closer to 505 KZT per dollar....

International Finance Banking EU Investment Projects Economy growth EU Engagement Finance EIB investment

Securing EIB Funding in Kyrgyzstan: An Interview with VP Kyriacos Kakouris

Central Asia is rapidly developing its economy, with several international financial institutions successfully operating here. Among them is the European Investment Bank. Vice-President Kyriacos Kakouris spoke with The Times of Central Asia about its activity in Kyrgyzstan. TCA: Could you briefly introduce the European Investment Bank (EIB) and its main objectives in Kyrgyzstan? KK: The EIB is more than a bank, it is part of the EIB Group, one of the largest multilateral financial institutions in the world with a unique position allowing it to mobilize large-scale financing. The European Investment Bank, as the long-term financing institution of the European Union, is closely aligned with EU priorities, such as the EU-Central Asia strategy and the EU Global Gateway strategy, and is ready to play a more significant role in helping Kyrgyzstan respond more effectively to current and future challenges. The Bank has already been involved in economic development, transport, and climate action operations. We are interested in supporting the development of a competitive and environmentally friendly private sector that can incorporate modern and green technologies into various sectors. TCA: What are the EIB's priorities for supporting economic growth and sustainability in Kyrgyzstan? KK: EIB Global launched its activity in Kyrgyzstan in 2014 and up to now, has signed three separate operations worth a total of €112 million. We have established a very positive relationship with the Embassy of Kyrgyzstan in Brussels, which is essential for our dialogue with the Kyrgyz authorities. All operations involve co-financing either with other international financial institutions like the World Bank and the European Bank for Reconstruction and Development (EBRD) or development institutions such as KfW. So far, the Bank has approved lending operations for three projects on power transmission, water and waste management, and the agri-food sector, in line with the priorities defined in the EU-Central Asia and the EU Global Gateway strategies. The main aims of these projects are to protect the environment and take action against climate change. We will soon sign a €9 million top-up for the completion of the Kyrgyz section of the high-voltage transmission line known as CASA-1000. This project is part of a larger regional electricity scheme called Central Asia - South Asia Electricity Transmission and Trade initiative, covering Kyrgyzstan, Tajikistan, and Pakistan. This project is essential for developing trade in sustainable renewable electricity between the countries, using energy generated from renewable hydropower sources in the region. This will alleviate power shortages and increase export revenue in Kyrgyzstan and Tajikistan. TCA: How does the EIB's role differ from that of other development banks or financial institutions? KK: The EIB is the EU bank, and its shareholders are the 27 EU Member States. EIB Global is focused on EU policy priorities such as the EU strategy on Central Asia and the EU Global Gateway, supporting the green transition, boosting technological innovation, bolstering security and defense, and supporting regional cohesion and the development of social infrastructure. Our commitment to international development and capital market integration secures Europe’s strong global presence. Our...

National Bank money State Budget Banking Finance

Kazakhstan’s National Bank Raises Prime Rate to 15.25% Annually

The Monetary Policy Committee of Kazakhstan’s National Bank has raised the prime rate to 15.25% per annum, with an allowable deviation of 1 percentage point. This adjustment comes in response to the sharp weakening of the national currency, the tenge. The decision is grounded in updated forecasts and assessments of inflationary risks. The National Bank cited easing monetary conditions—driven by the tenge's depreciation, declining real interest rates, and heightened inflation expectations—as key factors behind the rate increase. Financial market volatility has further underscored the need for this measure. The National Bank emphasized its commitment to closely monitoring market dynamics and taking additional measures if needed to stabilize inflation. The central goal remains returning inflation, which has risen to 8.5%, to a target of 5%. The next decision on the prime rate is scheduled for January 17, 2025. Role of the Prime Rate The prime rate is a critical economic tool, directly influencing credit costs for banks and shaping inflation trends. Determined through an analysis of economic conditions, it regulates the money market. While a lower prime rate may temporarily weaken the tenge, it can boost production and economic growth in the medium term. Recent Adjustments The latest hike follows a series of previous adjustments. In February 2024, the prime rate was reduced to 14.75%, followed by another decrease to 14.25% in July. The rate was maintained at this level in October before this recent increase. Looking ahead, the National Bank has also published a schedule of rate decisions for 2025, underscoring its transparent approach to monetary policy.

Finance Banking GDP State Budget National Bank

Kyrgyz National Bank Maintains Discount Rate at 9% Amid Stable Inflation and Economic Growth

The National Bank of the Kyrgyz Republic has announced its decision to keep the discount rate steady at 9%, according to a statement published on its official website. The Bank credited its effective monetary policy for maintaining stable inflation. As of November 2024, annual inflation dropped from 7.3% at the start of the year to 5.2%, aligning with the regulator’s targets. Inflationary pressures remained moderate, with slowed price growth in both food and non-food categories. Key drivers of price levels include strong domestic demand and the impact of tariff policy measures. Kyrgyzstan’s economy continues to demonstrate robust growth, primarily driven by expansion in the construction and services sectors. Real GDP grew by 9.6% during the first ten months of 2024, fueled by increased domestic consumption supported by rising household incomes. Higher real wages and a surge in individual remittances have contributed significantly to this growth. Fixed asset investments, largely financed by domestic sources, have also risen. The domestic foreign exchange market has shown resilience, with fluctuations in the national currency attributed to seasonal factors and balanced supply-demand dynamics. The National Bank has conducted $20.75 million in net foreign currency sales since the beginning of the year to prevent sharp exchange rate volatility. The Bank has progressively adjusted its discount rate over the past two years. In November 2022, it was reduced from 14% to 13%, followed by further reductions in 2024: from 13% to 11% in April and then to the current 9% in May. The next review of the discount rate is scheduled for January 27, 2025.