DUSHANBE, August 17, 2012, Asia-Plus — Tajikistan’s central bank cut its refinancing rate on August 16 to 6.5 percent from 6.8 percent, its fourth reduction this year, after inflation eased last year.
We will recall that the National Bank of Tajikistan (NBT) last cut the key rate on July 9, to 6.8 percent from 8.0 percent on March 31.
On March 31, Tajik central bank lowered its refinancing rate to 8.0 percent from 9.0 percent on February 27. On February 27, Tajik central bank cut its key rate to 9.0 percent from 9.8 percent. It had cut the rate from 10.0 percent on December 20, 2011.
In 2011, Tajik central bank raised its refinancing rate on October 14 to 10 percent from 9.0 percent set in March.
In 2010, NBT changed the refinancing rate only once, in November. Tajik central bank raised the refinancing rate from 8 percent in July 2009 to 8.25 percent in November 2010.
In 2009, NBT changed the refinancing rate four times and the 8-percent rate set in July 2009 was the lowest refinancing rate over the past six year. In 2009, the refinancing rate was lowered from 10% on May 12 to 9% in late June. Before that, the refinancing rate was lowered from 13.5% to 12% on January 28 and to 10 percent on May 12.
In 2008, the central bank changed the refinancing rate three times. On April, the bank cut it from 16 percent on February 8 to 14.75. On July 3, the refinancing rate was reduced from 14.75 percent to 14 percent and on November 19, it was reduced to 13.5 percent.
The highest refinancing rate was reported for October 2003 – 18.06 percent and the refinancing rate for December 2003 was 8.22 percent.
Refinancing, which is one of the main instruments of monetary policy, can alter the monthly payments owed on the loan either by changing the loan”s interest rate, or by altering the term to maturity of the loan. More favorable lending conditions may reduce overall borrowing costs. Another use of refinancing is to reduce the risk associated with an existing loan. Interest rates on adjustable-rate loans and mortgages shift up and down based on the movements of the various indices used to calculate them. By refinancing an adjustable-rate mortgage into a fixed-rate one, the risk of interest rates increasing dramatically is removed, thus ensuring a steady interest rate over time. This flexibility comes at a price as lenders typically charge a risk premium for fixed rate loans.
