Olzhas Khudaibergenov on currency interventions

Olzhas Khudaibergenov, a local economist popular on social networking websites for his comments and explanatory articles, is worried that frequent currency interventions of the Central Bank to sustain the current tenge exchange rate may result in diminishing of the money of the National Oil Fund [accumulating windfall oil revenues]. That was the opinion voiced by him in an interview for Tengrinews.kz.

 Wednesday, September 16, the country’s Central Bank had to resort to currency interventions worth $114 million to sustain the tenge exchange rate. Reps of the Central Bank emphasized the steep appreciation of the US Dollar in Kazakhstan had been propelled by speculative actions of some market players.

 According to him, the mere fact of the Central Bank letting the tenge float freely and abstaining from permanent regulation of the FX market is a major source of uncertainty. “With these actions in place, market players have to be facing a greater uncertainty. It is involvement of the Central Bank that makes the tenge exchange rate somewhat foreseeable. The currency interventions September 16 totaled $144 million. Should the Central Bank do that every day, the total monthly amount may reach $2 billion for 22 business days. However, the Central Bank may choose not to intervene every day”, he said.

“There had been many reproaches [before the decision was taken August 20 to let the tenge float freely] that the Central Bank had been wasting its international reserves to keep the tenge exchange rate within a set band. The nation shifted to the free floating mode, seeing its currency devalued steeply. However, it was obvious that the Central Bank couldn’t help intervening. A steep currency devaluation will not allow the Bank to stay away from the market. It didn’t make sense to be critical of the Central Bank spending the international reserves to keep the tenge exchange rate. The tenge should have been depreciated slowly and more smoothly”, he said.

August 20 the country’s President Nursultan Nazarbayev said that the measures to maintain the set tenge exchange rate in 2014-2015 had cost a total of $28 billion, with $10 billion spent in 2015.

 Mr. Khudaibergenov is confident the Central Bank will have to resort to currency interventions further on. “When the Central Bank purchases US Dollars, it issues extra tenge into the circulation and transforms the purchased US Dollars into FX reserves. In the opposite case, the Bank sells US Dollars, withdrawing some tenge from the circulation. If the Bank doesn’t intervene, there will be sharp fluctuations of the exchange rate. Following the interventions on Wednesday, the exchange rate stands at 285 tenge for USD 1. Apparently, the Central Bank gave a signal it won’t let the exchange rate weaken to 300 tenge for USD 1. Even if it does let that happen, it should be a smooth depreciation, rather than daily swings”, he said.

 Earlier September 16 Mr. Khudaibergenov voiced a suggestion to publicize all the information on all the current transactions at the Kazakh Stock Exchange that have been resulting in speculative changes of the tenge exchange rate. In response, the Central Bank published a list of banks involved in FX trades September 16. The traded value for the US Dollar/tenge currency pair for Halyk Bank stood at $58 million, followed by QAZAQ BANKI with $47.6 million, Altyn Bank with 47.1 million, Kazkom Bank with 35.5 million,  AsiaCredit Bank with 32.7 million, Tsesna Bank with 28.25 million, Delta Bank with 21.6 million, Bank RBK with 20.75 million, CitiBank Kazakhstan with 20.7 million, Eurasian Development Bank with 19 million, Alfa Bank with 18.2 million, Nurbank with 16.75 million, Center Credit Bank with 14.65million, Sberbank with 13.1 million, Kaspi Bank and Astana Bank with 13 million each, RBS with 10.75 million, ATF with 9.5 million, Eurasian Bank with 7 million, VTB with 5.15 million, ForteBank with 4.8 million, KazInvestBank with 2.75 million, TPBK with 500 000, Kazakhstan Ziraat International Bank with 400 000, and Home Credit Bank with 50 000.

However, Mr. Khudaibergenov was not content with the data, saying “it was unclear if the banks had been buying or selling FX. There should be a detailed break-down to draw some conclusions (…) I  am once again asking the National Bank to publicize the information”.