Unlike Russia’s ruble, Kazakhstan’s national currency has for several months managed to hold ground against the dollar, only for it to now slump dramatically and spread alarm of more retreats.
Several commercial banks on August 19 began around mid-morning to offer exchange rates as high as 198 tenge to the dollar, against the 188.5 tenge listed on the National Bank website.
The domestic KASE stock exchange was at same time running trades of 195 tenge to the dollar.
Stubbornly low oil prices appear to have combined with the battering of the Chinese yuan to finally force Kazakhstan’s hand. The apparent decision to allow the tenge to float will gravely dent the credibility of National Bank chairman Kayrat Kelimbetov, who promised as recently as July 15 that the currency would not slip below 190 in the coming quarter. And not speak of President Nursultan Nazarbayev, who promised after being re-elected in April that there would be no more sharp devaluations.
Economist Olzhas Hudaybergenov, who heads the Macroeconomic Research Center, wrote on his Facebook page that hopes the currency would resist lay in the hopes that oil prices would stick at around $55-60 mark. The global Brent benchmark slid below $50 last week and shows no immediate signs of rebounding.
“This means the need of a certain section of the business world for a sharp devaluation — it is not important whether it would happen suddenly or over a few days — will be met. I think the next few days will bring us some clarity on this,” he wrote.
Hudaybergenov said that he agreed with supporters of a correction to the tenge, who argue the move will boost competitiveness, save jobs and increase productivity.
Sabit Hakimzhanov, director of the research department at Halyk Finance investment bank, suggested the tenge might gradually have to be devalued to 230 against the dollar.
“The fact that the tenge kept falling right until the close of trading does not go against the notion that the new level the National Bank plans to defend (if it has taken that decision) is a lot higher than 196,” he wrote on his Facebook page.
To stop at a one-day five percent slide would be irrational, Hakimzhanov said.
“That is too little to solve the problems of an overvalued tenge, but enough to provoke another fall in demand for the tenge,” he wrote.
An Interfax news agency reporter in the business capital, Almaty, observed frenetic buying at exchange points.
“We heard that the dollar went up, so we came. We went to several currency exchange points, but they weren’t selling. They say it is going to go up again. I brought everything I had and I am going to use it all to buy dollars,” one hopeful dollar-buyer told Interfax.
Exchange currency shops in some towns and cities have closed altogether, Interfax said.
Nazarbayev was uncharacteristically swift in summoning a meeting to discuss ways how to prop up the economy, which is now looking in very grim shape indeed.
“In past years, we have built a lot, expanded staffing and increased salaries. But now there is a lack of funds and so financing for new projects will be rigidly limited,” he said. “It is necessary to establish a moratorium on various initiatives until 2018.”
Nazarbayev said the priority should be on supporting key sectors with a completive edge.
Investment and Development Minister Asset Issekeshev said four promising sectors would receive special attention.
"Non-ferrous metals, production of fertilizers and agrochemical products, the oil and gas industry, and the food industry. We plan to sign long-term agreements with all joint stock companies by the end of the year. And we are ready to support them, even with sovereign guarantees,” he said. "In turn, they have to commit themselves to bringing revenue to the country, to engage in resource exploration and to support local businesses.”