Current tenge exchange rate is adequate: Kazakhstan central bank Governor

Governor of the Kazakhstan National Bank Kairat Kelimbetov sees the current exchange rate as adequate considering the present situation, Tengrinews reports.

"The trading sessions (of the Kazakh tenge at KASE) held over the past weeks have showed that with the traded volume being not very large, rocking the boat even in a small way can create an artificial deficit of the tenge and increase the volatility of the exchange rate. To prevent these things from happening, the National Bank has been making interventions. We do reserve the right to monitor the market and make interventions.

"As I have already said, we expect the conversion of the money in the National Fund to be completed by the end of the year. So there will be no deficit of US dollars on our currency market. As for the current exchange rate of the tenge (...) we believe it is adequate to the external factors that influence our currency," Kelimbetov told the journalists at the sidelines of the Parliament plenary meeting on October 7. Of those external factors, the Governor specifically mentioned oil prices.

"We are talking about the exchange rate of 270 tenge per $1, with the base interest rate being at 16%, the Russian ruble at around 70 per $1 and oil price at $50 per barrel or lower. We view the current exchange rate is adequate (...). With these conditions it is adequate. Any of these parameters can go up or down. And we need to react adequately and absorb the shocks.

"When we have only a handful of players (at the exchange market), 5 million dollars is enough to stir up  the whole country. That is why the National Bank is keeping a close eye on the trading. We are watching and controlling everything," Kelimbetov said.

Meanwhile, the National Chamber of Entrepreneurs of Kazakhstan is critical of the interventions conducted by the National Bank.

The tenge was floated on August 20 and as of September 30 the interventions totaled $1.33 billion.

Experts from the National Chamber of Entrepreneurs said that keeping the currency rate stable by "burning reserves" was not the right strategy. Deputy Chairman of the National Chamber of Entrepreneurs Yuliya Yakupbayeva commented on the effect of the free floating tenge and the interventions.

"We have been tracking the changes in different sectors of the economy. Certainly, our exporters are benefiting (from the changes in the tenge exchange rate). In a sense, the national budget, too, is benefiting. Whereas the sectors that depend on import as somewhat at a disadvantage," Yakupbayeva said.

According to Yakupbayeva, market speculations that create spikes of the tenge rate were undermining Kazakhstan's campaign to dedollarize the national economy.

"The spikes that we saw in the beginning of September is a headache. (...) A majority of the population (alarmed at the instability of the tenge) converted their savings into foreign currencies. These spike undermine trust in the national currency.

"We need to continue our dialogue with the National Bank to ensure three things. First, to ensure free access to the national currency and business loans at reasonable rates. Second, find a way to regain trust in the national currency through implementing the dedollarization plan. And finally, ensure relative clarity and stability of the exchange rate in midterm for companies to be able to sign contracts again," Yakupbayeva said.  

To tackle the price spikes, Yakupbayeva suggested introducing a trading halt if the prices moves by more then 3% in a trading day at the KASE. She also proposed to bring other large players, such as large companies, to trade tenge at the KASE that is currently dominated by banks.

In response, Kazakhstan central bank Governor Kelimbetov said that the regulator with consider the suggestions of the National Chamber of Entrepreneurs. But he disagreed that the bank was "burning reserves" by making interventions. 

"It is our job to supply US dollars into the economy. And those were not even interventions to put out the craze, but mere provision of dollars to avoid artificial shortage of tenge," Kelimbetov said.

"We are discussing the situation. We are not introducing any limitations at this point. But in general, we believe that the situation and understanding of it have stabilized. Some analytics and foreign exchange market professionals still believe that a different exchange rate is needed to achieve the equilibrium exchange rate. But we have to understand that there needs to be a balance between the interests of producers, dollar deposit holders and consumers. That is why the National Bank is safeguarding the balance of interests. (...) We do not have a deficit of dollars. Everything is good with dollar, everything is good with the exchange rate, and everything will be good with the inflation rate," Kelimbetov said.

In conclusion, Kelimbetov declared that he kept his personal savings in tenge.

"As the Governor of the National Bank I am supposed keep my savings in tenge. That is what I am doing," he said.

Reporting by Assemgul Khassenova, writing by Tatyana Kuzmina and Gyuzel Kamalova