Abstract

Following independence in 1991, the states of the former Soviet Union continued to operate essentially within the framework of the monetary and financial system inherited from the Soviet era.1 The Central Bank of Russia took over the role of the now defunct Gosbank as the bank of emission, and the newly independent states continued to use the ruble as their currency. To many of the countries, the main attraction of being a part of the ruble area was the possibility of continued access to Central Bank of Russia credit to finance trade deficits with Russia. In January 1992, the Central Bank of Russia established correspondent accounts with the central banks of the individual states through which it provided credit, thus supplying rubles to settle interstate payments. The individual central banks also established correspondent accounts bilaterally.

Following independence in 1991, the states of the former Soviet Union continued to operate essentially within the framework of the monetary and financial system inherited from the Soviet era.1 The Central Bank of Russia took over the role of the now defunct Gosbank as the bank of emission, and the newly independent states continued to use the ruble as their currency. To many of the countries, the main attraction of being a part of the ruble area was the possibility of continued access to Central Bank of Russia credit to finance trade deficits with Russia. In January 1992, the Central Bank of Russia established correspondent accounts with the central banks of the individual states through which it provided credit, thus supplying rubles to settle interstate payments. The individual central banks also established correspondent accounts bilaterally.

Introduction of National Currencies

The loss of access to rubles in July 1993 confronted the Central Asian states with a choice between subordinating monetary policy to Russia under a new ruble area controlled by the Central Bank of Russia or gaining full autonomy in the pursuit of their own stabilization policies. The Central Asian states opted to pursue their own policies, albeit with differing degrees of enthusiasm and urgency.

The Kyrgyz Republic took the lead in using a new domestic currency by introducing the som in May 1993 and adopting a floating exchange rate (Table 5.1). Kazakhstan and Uzbekistan, instead, signed an agreement with Russia in August 1993, establishing a new ruble area under Central Bank of Russia control, which later included Tajikistan, Armenia, and Belarus. Uncertainties about the workings of the new system triggered large disturbances in domestic financial markets. In November 1993, Kazakhstan and Uzbekistan reneged on the new ruble area. On November 15. Kazakhstan introduced the tenge under a floating exchange rate regime, and Uzbekistan introduced the sum-coupon,2 initially pegging it to the ruble at par. Turkmenistan, which did not rely on Central Bank of Russia credits, given its large trade surplus (mostly gas related), also introduced its own currency, the manat, in November 1993. Tajikistan opted for a dual arrangement, continuing to use the cash ruble—which was provided by Russia on strict commercial terms—while at the same time creating noncash (deposit) rubles through the National Bank of Tajikistan. As the supply of noncash rubles increased much faster than cash rubles, the values of cash versus deposit rubles deviated and cash shortages emerged. Finally, under a broad currency reform, Tajikistan introduced the Tajik ruble in May 1995.

Table 5.1.

Introduction of National Currencies

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Source: International Monetary Fund.

Conduct of Monetary Policy

Macroeconomic Situations Prior to Reforms

The transition period witnessed sharp deteriorations in the macroeconomic situations of the Central Asian states. Disruptions in trade patterns and increases in trade prices triggered large external current account deficits (except in Turkmenistan, which benefited from sharp price increases for natural gas exports), ranging in 1993 from under 10 percent of GDP in Kazakhstan and Uzbekistan to 16 percent of GDP in the Kyrgyz Republic, and to 31 percent of GDP in Tajikistan (Table 5.2). In the Kyrgyz Republic and Tajikistan, growing external deficits partly mirrored large fiscal deficits that were mainly associated with the withdrawal of transfers from the Soviet Union. While Turkmenistan and Uzbekistan had adequate international reserves, reflecting their strong external positions, reserves were low in Kazakhstan and the Kyrgyz Republic, and virtually nonexistent in Tajikistan.

Table 5.2.

Selected Macroeconomic Indicators

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Source: National authorities.

Until 1994, Russian rubles; as of 1995, Tajik rubles.

Official rate.

The most striking indicators of worsening macro-economic situations, however, were the very high rates of inflation in the Central Asian states. Confronted with enormous structural changes in their economies following the collapse of the Soviet Union, the overriding policy concern in the Central Asian states was to contain the impact of the adjustment on incomes. The newly established central banks heavily financed state enterprise losses and emerging government deficits. As a result, broad money grew dramatically in all cases—as much as fourfold in Uzbekistan and eightfold in Turkmenistan in 1992—and in most of the states (with the exception of the Kyrgyz Republic) at similar or higher rates in 1993 (Figure 5.1 and Table 5.3). Strong monetary growth, combined with price liberalization and moves toward world prices in interstate trade, led to a rapid acceleration in inflation. In 1992, inflation ranged from about 650 percent in Turkmenistan to almost 3,000 percent in Kazakhstan. In 1993, inflation remained at over 2,000 percent in Kazakhstan, accelerated to 1,400 percent in Turkmenistan and to 7,000 percent in Tajikistan, while declining to around 700 and 800 percent in the Kyrgyz Republic and Uzbekistan.

Figure 5.1.
Figure 5.1.

Monetary Growth and Inflation

(In percent)

Sources: IMF Staff Country Reports.1End-of-period; broad money (M2) excludes foreign currency deposits.
Table 5.3.

Selected Monetary Indicators

(End-of-year percentage changes unless otherwise indicated)

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Sources: National authorities; and IMF staff estimates.

Excluding foreign currency deposits.

Ratio of currency to deposits denominated in domestic currency.

Ratio of GDP to end-period broad money (excluding foreign currency deposits).

The introduction of the Tajik ruble in 1995, with different conversion rates for different types of deposit, precludes comparison of 1995 data with the previous year.

Implementation of Stabilization Policies and Initial Results

In all five Central Asian states, the ultimate objective of governments was to restore growth and to raise the living standards of the population. There were, however, differing degrees of recognition of the need for stabilization as a precondition for sustained growth. As of 1993, Kazakhstan and the Kyrgyz Republic maintained stabilization as an overriding policy objective, while Turkmenistan and Uzbekistan generally strove to spur employment and output growth by supporting state enterprises in ways that were inflationary and impeded growth. Tajikistan’s situation was complicated by political difficulties and the military conflict, so that policy priorities were less clear in the initial period of transition.

The stabilization efforts of the five Central Asian states are detailed in Box 5.1. Kazakhstan and the Kyrgyz Republic stand out as the pioneers of economic reform in this group, and have progressed the most in achieving stabilization and growth. In the Kyrgyz Republic, inflation declined sharply to under 100 percent in 1994, the first year of the stabilization program. In Kazakhstan, there was a setback in early 1994 due to the monetization of interenterprise arrears, but a renewed emphasis on stabilization reduced inflation sharply to 60 percent by en-1995. Uzbekistan delayed implementing a stabilization program until after replacing the sum-coupon with the sum in mid-1994, but succeeded in bringing inflation under control by mid-1995. In Turkmenistan, as of 1996, monetary policy was directed at reducing inflation, mainly by offsetting the expansionary impact of directed credits with stepped-up foreign exchange sales, and inflation declined rapidly thereafter to about 20 percent by end-1998. Tajikistan’s experience was more turbulent. A monetary-based stabilization effort following the introduction of the Tajik ruble in mid-1995 was aborted by excessive bank credit to the government and state enterprises. A subsequent, more comprehensive stabilization program sharply lowered inflation in 1996 to about 40 percent, although there was a reversal in 1997 as policies lapsed during intensified civil conflict. Inflation was reduced sharply to 3 percent in 1998 as financial policies were once again tightened.

There were essentially two basic phases to reform. Notwithstanding unstable monetary relationships, the first phase relied primarily on monetary targeting, supported by strengthened fiscal discipline (mainly through expenditure restraint) and flexible exchange rate arrangements. In this phase, interest rates also moved toward positive real levels and directed (preferential) credits were discontinued. In the subsequent phase of stabilization, the exchange rate played an important role in sustaining the gains achieved and served as an indicator for the appropriateness of macroeconomic policies. Although floating exchange rate regimes were outwardly sustained in most cases, the exchange rates under these systems were effectively stabilized under a managed float by the central banks of the states. In addition, there was greater emphasis on speeding progress with structural reforms—notably public enterprise restructuring and privatization, tax reform, and financial sector reform—as an essential input into firming stabilization gains and setting the conditions for sustained growth. Among the faster reformers, Kazakhstan maintained a pragmatic approach to using monetary and exchange rate anchors for stabilization, while it further reduced fiscal and external imbalances and directed efforts at pushing forward with structural reforms. As a result, since 1996 it has had the lowest inflation rate of the five Central Asian states (less than 2 percent in 1998). Although the Kyrgyz Republic essentially continued to pursue money-based stabilization, exchange rate and external competitiveness considerations played an increasing role in policy formulation, while emphasis continued to be placed on structural reforms. Among the slower reformers, Turkmenistan and Uzbekistan, the exchange rate became an increasingly important indicator for stabilization. Both countries resorted to nonmarket-related measures, however, to maintain their official exchange rates, at the expense of sustaining sizable and recently widening gaps with parallel market rates.

Following the financial crisis in Russia in August 1998, however, exchange rates came under pressure and foreign investors reevaluated the risks of financing countries in the region. Indeed, risk premiums on interest rates increased and access to both domestic and foreign financing fell sharply; demand for Kazakh and Kyrgyz domestic-currency-denominated assets plummeted. Policy responses differed among the Central Asian countries. At first, Kazakhstan, the Kyrgyz Republic, and Tajikistan allowed some depreciation of their currencies, combined with heavy intervention. In each case, intervention was supported by a tightening of fiscal and monetary policies, including higher interest rates. In Kazakhstan the authorities were able to prevent a significant depreciation in the remainder of 1998, albeit at the cost of sizable intervention, but the Kyrgyz Republic and Tajikistan switched to a policy of minimal intervention, permitting their currencies to depreciate at a faster pace in order to allow exchange rates to find their own new levels. Uzbekistan and Turkmenistan, on the other hand, responded mainly by intensifying exchange restrictions, rather than tightening monetary and fiscal policies. As a result, while official exchange rates remained more or less stable, exchange rates in parallel markets depreciated sharply.

Factors Affecting Money Demand

The demand for money in the Central Asian states has generally remained low, notwithstanding recent stabilization gains, reflecting continued lack of confidence in the currencies. Monetary policy in these countries targeted monetary aggregates. Slower growth in these aggregates was expected to lower inflation, restore confidence, and affect real sector variables in the desired direction. In all five Central Asian states, money demand declined rapidly in the first year after the introduction of the new currencies. This was reflected in a sharp increase in velocity as the public increasingly shifted into goods and foreign exchange. The demand for money recovered only very gradually following macroeconomic improvements, hampered in some cases by intensifying problems in banking systems.

Lack of confidence in the currencies was also reflected in the growing share of foreign currency deposits in broad money (M2, including foreign currency deposits), and the high ratio between currency in circulation and deposits denominated in domestic currency. The ratio of currency in circulation to M2 (excluding foreign currency deposits) is not only high in the Central Asian countries because of the underdeveloped payments systems, but has remained high also in those countries that have made considerable progress in stabilization. In Kazakhstan, the Kyrgyz Republic, Turkmenistan, and Tajikistan, currency still accounted for 60–85 percent of M2 at end-1998. In Uzbekistan, currency in circulation accounted for about 50 percent of M2, but this can be attributed to restrictions on cash withdrawals. A tendency toward some strengthening in financial intermediation from late 1997 onward (notably in the Kyrgyz Republic) faced a setback in the aftermath of the crisis in Russia.

Stabilization Policies in the Central Asian States

Kazakhstan adopted a comprehensive stabilization and reform program following the introduction of the tenge in late 1993, with monetary targets serving as nominal anchors. Large credits were extended to clear interenterprise arrears, however, and little progress was made in reducing the fiscal and current account deficits. Monetary policy was subsequently tightened, assisted by measures to reduce the fiscal deficit. Following a surge in capital inflows in 1995. monetary targets again gained primacy. The National Bank of Kazakhstan engaged in sterilization operations, while some nominal appreciation of the exchange rate was allowed. Stabilization efforts were further challenged in 1996 when a banking crisis eroded confidence in the tenge. Central bank sales of foreign exchange absorbed excess liquidity and helped stabilize the exchange rate. Improvements in the fiscal and external positions during 1995–96 solidified the stabilization gains. By 1998, inflation was reduced to 2 percent.

The Kyrgyz Republic also adopted a money-based stabilization program in 1993, which was derailed when sizable credits were extended to finance the agricultural sector and public enterprises. Monetary policy was subsequently tightened and overall credit growth in the economy almost came to a standstill in 1994 as banks were instructed to stop lending to state enterprises in financial difficulties. By March 1995, monthly inflation declined to about 1 percent. This policy stance was broadly continued in the subsequent period, although periodic sharp increases in central bank credit to the government (reflecting expansionary fiscal policies in late 1995 and, again, in late 1996 in connection with elections) and depreciations of the exchange rate led to temporary surges in inflation. Since January 1998, the central bank has no longer been allowed to extend credit to the government. Monthly inflation increased in late 1998 following the financial crisis in Russia, which resulted in a sharp depreciation of the exchange rate.

In Tajikistan, inflation surged in 1993 as pre—1993 rubles, which continued to be legal tender, streamed in from neighboring countries. Inflation declined following a currency reform and the imposition of severe restrictions on cash withdrawals in 1994, but rebounded in early 1995 reflecting an easing in monetary policy. The stabilization program following the introduction of the Tajik ruble in May 1995 was money-based. However, excessive bank credit to the government and enterprises led to hyperinflation in the second half of the year. A more comprehensive stabilization and reform program introduced in early 1996 initially succeeded in lowering inflation, but renewed political problems prevented a sustained implementation of the program and, once again, eroded the stabilization gains. Renewed efforts at stabilization resulted in a sharp lowering of inflation during 1998.

Turkmenistan failed to support the introduction of the manat with a comprehensive stabilization program. On the external side, a major policy objective was to increase international reserves, while monetary policy was geared to maintaining employment and incomes by providing preferential credits to enterprises. The first serious stabilization effort came in 1996, when a tighter monetary policy contributed to a slowdown in inflation. The lack of hard budget constraints on enterprises was, however, reflected in a large-scale resumption of directed credits in late 1996 and 1997, The central bank’s efforts shifted to stabilizing the exchange rate by sharply increasing foreign exchange sales, financed partly by foreign borrowing. As a result, monthly inflation rates dropped below 3 percent as of February 1997. Monetary policy continues to be constrained by the absence of central bank control over international reserves (which remain under the president’s control). In late 1998, monthly inflation increased to over 4 percent, following large directed credits and central bank financing of the budget.

Uzbekistan failed to adopt strong stabilization measures in conjunction with the introduction of the sum-coupon in late 1993. Large monetary expansion caused monthly inflation to remain at around 30–40 percent until mid-1994. A more comprehensive stabilization effort was made following the introduction of the sum. During the second half of 1994 and 1995, the authorities mainly targeted monetary aggregates. Inflation declined, although remaining higher than anticipated due to large unsterilized foreign exchange inflows. In the last quarter of 1996, sizable lending to the cotton sector was reflected in a rising bank-financed budget deficit, an acceleration in inflation, and a deterioration in the external current account. Foreign exchange restrictions were reimposed and dual exchange rates maintained, with a far more depreciated cash rate. Monetary policy was subsequently tightened, and monthly inflation declined to about 2 percent during 1998.

Impact of Capital Inflows

Similar to the experience of other transition economies, some of the Central Asian states witnessed sharp increases in capital inflows, which threatened their disinflation efforts.3 This not only reflected the attraction of a more stable economic environment for foreign capital, but also some remonetization and reverse currency substitution by the population as confidence in the economies strengthened. The ensuing increase in domestic liquidity ran the risk of undermining the stabilization efforts under way, and delaying enterprise and bank restructuring by encouraging less prudent lending. The authorities were faced essentially with the choice of sterilizing the additional liquidity through sales of central bank or treasury bills (in excess of budgetary financing needs), further fiscal tightening, exchange rate appreciation, or a combination of these policies.

In Kazakhstan, strong capital inflows in the first half of 1995–associated with improved economic performance, but also with the granting of management contracts to foreign parties—threatened a rebound in inflation. The authorities’ initial reaction was to offset the liquidity impact of the inflows by tightening monetary policy, including through sales of short-term central bank notes, while maintaining a stable exchange rate. When the inflows persisted, the focus of policies was shifted to attaining the monetary targets and allowing some appreciation of the exchange rate. In Uzbekistan, the central bank responded to a large increase in international reserves at end-1994 by tightening monetary policy, including through sales of central bank certificates of deposits and interventions in the interbank market. In both instances, policy choices were needed to weigh the potentially damaging effects of persistent exchange rate appreciation on export competitiveness against the desirability of allowing some exchange rate appreciation to help promote domestic price stability. Also, prolonged sterilization through sales of central bank notes carried quasi-fiscal costs and was likely to be constrained by the capacity of the local markets to absorb such sales. These issues are likely to be confronted by the other countries in the group as reforms progress. To the extent that a strengthening in the credibility of reform programs and sustained upturns in economic activity raise the real demand for money in these countries, increases in their money supplies associated with capital inflows could partly be accommodated without weakening their disinflation efforts. Until that occurs, the fine tuning of policies in the face of capital inflows will be crucial to protecting stabilization gains.

Monetary Policy Reforms

The implementation of monetary policy in the Central Asian states was constrained by

  • weak understanding of the role and the importance of an independent monetary policy, lack of experience by the newly formed central banks, and inadequacy of monetary policy instruments;

  • a strong legacy from the Soviet period, when banks were merely administrators of money flows allocated under the plan, and hence an absence of adequate infrastructure and behavior patterns through which monetary signals could be transmitted;

  • the ongoing restructuring of national banking systems and weaknesses in the legal and regulatory framework for banking activities; and

  • low demand for money and widespread currency substitution, reflecting weak confidence in the newly introduced currencies fueled by instability in the years preceding their introduction, as well as a prevalent distrust of banks by the public, initially because of restrictions on deposit withdrawals and confiscatory elements in the currency reform measures, and later due to financial problems faced by banks.

Addressing these issues was important for the success of money-based stabilization policies.

Central Bank Independence and Monetary Policy Instruments

At the outset of transition, the Central Asian states mostly continued to give precedence to financing state enterprises and the government over attaining monetary targets. The countries in question inherited a two-tiered banking system from the Soviet Union, in which the central bank (under the 1990 Law of the State Bank of the U.S.S.R.) was responsible for maintaining stability of the currency.4 The first stabilization efforts were derailed, however, mainly because of large central bank financing of enterprise losses and government deficits, as happened in the Kyrgyz Republic (1993), Kazakhstan (1994), and Uzbekistan (end-1996). In subsequent, more successful stabilization programs, these slippages were addressed by reinforcing the autonomy of the central bank and making bolder moves to reduce the budget deficit and impose hard budget constraints on state enterprises. Hence, the Kyrgyz Republic gave wide-ranging autonomy to its central bank in implementing policies to reduce inflation and stabilize the exchange rate with the central bank law of 1992, while since 1998, direct National Bank of the Kyrgyz Republic financing of the budget is not allowed. Kazakhstan, in a new central bank law adopted in 1995 (Table 5.4), introduced the requirement that the need for central bank financing of the budget be specified in the budget document. As a result, central bank financing declined sharply in both countries. In the other three countries, however, government-mandated central bank credits to finance the budget, as well as priority sectors and enterprises, continued, undermining attainment of the monetary targets. A new central bank law adopted at the end of 1996 gave the National Bank of Tajikistan independence, but pressure on the bank for ad hoc financing continued, despite the issuance of a presidential decree in mid-1997 explicitly terminating such credits.

Table 5.4.

Central Bank Reform and Monetary Policy Instruments

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Sources: IMF Staff Country Reports.

In order to improve the efficiency of credit allocation and move toward market-determined interest rates, starting in 1993, the Central Asian central banks gradually increased interest rates on their lending to market levels through credit auctions (except in Tajikistan, where this process began only in late 1997). In Kazakhstan and the Kyrgyz Republic, by mid-1994, virtually all central bank credit was channeled through auctions at market rates that were positive in real terms (Figure 5.2), In Uzbekistan, where interbank rather than central bank auctions were initiated, the central bank withdrew liquidity by buying credit in the auction in 1994–95, as large foreign exchange inflows increased liquidity in the banking system. As foreign capital inflows dried up in later years, banks became increasingly reliant on central bank financing, and interest rates again became essentially determined by the central bank. Turkmenistan’s experience was less even. Credit auctions were suspended in early 1996 and the central bank continued to provide subsidized credit under government direction; an attempt to reinstate credit auctions in mid-1996 failed, as did a recent similar attempt. On balance, the credit auctions gave the central banks exposure to market-related instruments and encouraged commercial banks to develop alternative sources of financing. In Kazakhstan and the Kyrgyz Republic, the interbank credit market became, by 1995, a more important source of finance than the credit auctions. At the same time, the interbank market could be used for interventions in line with the monetary policy stance. As the credit auctions lost importance as sources of liquidity for banks, the central banks of Kazakhstan and the Kyrgyz Republic established separate Lombard and emergency facilities to provide short-or medium-term liquidity to banks.

Figure 5.2.
Figure 5.2.

Interest Rates and Inflation

(In percent per month)

Source: National authorities.

A further step in increasing the mix of monetary policy instruments was the introduction of treasury bill auctions. Although such auctions were initiated in Kazakhstan and the Kyrgyz Republic during 1993–94, portfolios were initially too small to allow for open market operations. In order to increase the stock of tradable paper, the National Bank of Kazakhstan complemented treasury bills with its own short-term paper in June 1995. By mid-1996, it introduced repurchase and reverse repurchase transactions to regulate liquidity in the banking system. In the Kyrgyz Republic, central bank credit to the government was partially securitized by mid-1997, allowing the central bank to introduce repurchase and reverse repurchase operations in 1997; the credit auctions were officially stopped in January 1997. Treasury bill auctions in Uzbekistan did not start until 1996, although the Central Bank of Uzbekistan issued its own certificates of deposit in 1995, Turkmenistan started issuing treasury bills in July 1994, but the amounts issued by the ministry of economy and finance at fixed prices have remained relatively small, preventing their use for monetary policy purposes. There is no secondary market in treasury bills. Tajikistan has also made some progress in this area, with treasury bill auctions in limited amounts initiated in the latter part of 1998.

Interest Rate Policies

The Central Asian states (except Tajikistan) lifted interest rate controls on commercial banks during 1992–93. The central bank refinance rates in these countries, however, while more flexible than in the past, were often not adequately adjusted in line with inflation. Since central bank credit was a major source of finance for banks (on-lended at fixed spreads), interest rates remained negative in real terms. Also, in most countries, the ability of banks to accept deposits from individuals was limited (often to the bank’s capital), so that the savings bank—whose rates were fixed by the authorities—had a virtual monopoly over deposits of individuals. Adjustments in deposit rates considerably lagged behind the rapid increase in inflation, resulting in increasing negative real rates.

In the years following the introduction of national currencies, however, interest rates became gradually more market determined in Kazakhstan, the Kyrgyz Republic, and initially in Uzbekistan (although this was reversed in recent years). In these countries central bank credit was increasingly provided through credit auctions. By mid-1994, Kazakhstan and the Kyrgyz Republic had also removed all restrictions on banks’ holdings of deposits of individuals. As a result, interest rates in Kazakhstan and the Kyrgyz Republic became largely determined by market forces, especially as the developing financial markets gradually took over the role of central bank financing. There were similar developments, although with some delay, in Uzbekistan. In Kazakhstan and the Kyrgyz Republic, real interest rates became positive by mid-1994 and in Uzbekistan by end-1994, although in the latter two countries there were short reversals to negative levels at end-1996 as monetary policy was eased (Figure 5.2, see previous page).5 Real interest rates have gradually decreased from very high levels at the beginning of reforms. In Turkmenistan, a ceiling on bank credit interest rates was in force during most of 1995 and was reintroduced for agricultural credit in early—1998; direct credits at negative real rates set by the government continue to play an important role, and the yield on treasury bills is set by the ministry of economy and finance. In Tajikistan, commercial bank interest rates were not fully liberalized until May 1995, but since central bank financing continued to play an important role, interest rates were, in reality, set by the central bank in the credit auctions.

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1

For a detailed discussion of this system, see International Monetary Fund and others (1991), Vol. 2, pp. 107–35.

2

The sum-coupon was replaced by the sum in July 1994.

4

For a detailed analysis of central bank reform and monetary policy in transition economies, see Sundararajan, Petersen, and Sensenbrenner (1997), and de Melo and Denizer (1997).

5

The refinance rate is used as an indicator for all interest rates in the banking systems of these countries owing to the scarcity of reliable data on deposit and lending rates of banks. Although movements in banks’ lending and deposit rates increasingly followed movements in the central bank refinance rate, banks’ interest spreads remained high. For example, in Kazakhstan, the refinance rate was 35 percent a year in 1997. while the rate on short-term commercial bank credit was 45 percent and rates on deposits of households and legal entities ranged from 23–33 percent.