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It will take 6 years to have Kazakhstanis quote all prices in the tenge, Kazakhstan’s national currency, Olzhas Khudaibergenov, Director of the Center for Macroeconomic Research, believes. Yesterday in Astana he ran a briefing on how to reduce the excessive dollarization of the country’s economy, a Tengrinews.kz journalist reports.
It will take 6 years to have Kazakhstanis quote all prices in the tenge, Kazakhstan’s national currency, Olzhas Khudaibergenov, Director of the Center for Macroeconomic Research, believes. Yesterday in Astana he ran a briefing on how to reduce the excessive dollarization of the country’s economy, a Tengrinews.kz journalist reports.
“It will take 5-6 years for Kazakhstanis to stop quoting domestic prices in the US Dollar. However, it might happen faster. Holders of sizeable deposits kept with the country’s banking system would want the Government to grant them a guarantee to compensate for any currency exchange difference in case of a currency devaluation. Should there be such a guarantee in place, they would be ready to keep all their money in the national currency. Once they opt for the tenge, it would be a sign for smaller depositors down from the middle-sized to minor depositors [to do the same]. When minor depositors see their bigger peers shifting to the tenge, there will be an effective mechanism to ensure much wider reliance on the tenge. If the guarantee is offered, it will take a year or two to see drastic changes”, he said.
“There is one administrative instrument to trigger the changes (…) a legal norm prescribing to make all major purchases – such as purchasing a car or a piece of real estate – cashless would be a barrier to US Dollar-denominated transactions. Dollar notes in this case would not be eligible”, he said.
According to Mr. Khudaibergenov, dollarization was significantly on the rise back in 2000-2007. “Back then Kazakhstan heavily relied on external borrowings, coupled with currency flows of petrodollars. When borrowing from abroad, local banks provided US Dollar-denominated bank loans locally. Prior to the currency devaluation in 2009 the share of USDollar-denominated loans stood at 52% (…) and only in February 2011 did the Government prohibit banks from pegging their bank loans to the US Dollar or any other foreign currencies. At the moment the share of USDollar-denominated loans has fallen down to 30%. It is a rather high indicator; at best it shouldn’t exceed 5-10%”, he elaborated.
Earlier the country’s media reported that in an interview Mr. Khudaibergenov stated there would be no drastic changes of the tenge exchange rate in 2015. According to him, the conclusion rests on the joint statement of the Government and the National Bank December 24, 2014.
