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Kazakh Central Bank Governor speaks tenge liquidity and de-dollarization 15 февраля 2015, 12:28

Governor of the National Bank of Kazakhstan Kairat Kelimbetov speaks about the state of the financial market in Kazakhstan and what the government will do about it.
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Kairat Kelimbetov. Photo courtesy of primeminister.kz Kairat Kelimbetov. Photo courtesy of primeminister.kz

Governor of the National Bank of Kazakhstan Kairat Kelimbetov spoke about the tenge liquidity, de-dollarization of the Kazakh economy and the ruble, Tengrinews reports.

"How much tenge liquidity is needed in the short term - 3-6 months? Together with the banks we have calculated it to be between 500 billion ($2.7 billion) and 1 trillion tenge ($5.4 billion)," Kelimbetov said in a brief at the Central Communications Service headquarters in Astana on February 12.

According to the head of the National Bank, this amount will be covered through purchase of bonds of second-tier banks by the Single Pensions Fund and providing more than 250 billion ($1.35 billion) tenge to banks through the Distressed Assets Fund.

"60 billion tenge ($320 million) will be provided through monetary and interest rate swap through the Development Bank of Kazakhstan, about 80 billion tenge ($430 million) through KazAgro. Also we intend to make swaps with the European Bank for Reconstruction and Development and the Asian Development Bank to provide long-term and medium-term liquidity," he said.

According to him, every day the banks are provided with around $2.5 billion in tenge at 15 percent. "We plan to lower the rate, we will expand collateral obligations and the volumes may also be increased," Kelimbetov said.

The Governor of the National Bank also spoke about the plans to de-dollarize the Kazakh economy.

"An important task vested on us by the President of Kazakhstan, is taking measures to de-dollarize our economy. We are currently finishing the work, and in the beginning of next week we are planning to adopt a joint action plan together with the government for de-dollarization of the economy. These are medium-term measures that imply a change in the legal and regulatory work and generally the change of attitude towards the tenge as a measure of value and payment arrangements," the Governor said.

He noted that there was no fit-all prescriptions for de-dollarization in the world. "There is a standard set. It, for example, includes bringing more order into the payment for expensive purchases, such as real estate and cars. And in accordance with the law, if it is a non-cash payment, it should be carried out only in the national currency - the tenge," he said.

Kelimbetov also noted that there was no need to return to the previous parity ratio of tenge and ruble amid the 80% devaluation of the Russian ruble.

"The big question that many enterprises in our country are raising today is the question of competitiveness and the issue of tenge liquidity. Many different proposals have been discussed over the last 6 months, including the one to go back to the previous tenge-ruble parity. In our view, such proposals have no ground," he said.

The head of Kazakhstan's central bank pointed out that last year's exchange rate adjustment (nearly 20% devaluation of the tenge in February 2014) created a certain margin of safety. "In 2014, foreign exchange reserves increased. In January last year they equaled to 24 billion ($130 million), then on 1 January 2015 they reached nearly 29 billion ($156 million), that is, we have broken that trend observed in 2011-2013, when gold reserves of the National Bank decreased from 37 billion to 23 billion. Also, last year, imports fell, and in general we successfully tacked the tension and devaluation expectations that had formed during the preceding years," he added.

Kelimbetov informed that budgetary programs and quasi-public sector plans would be supported by measures in the fiscal and industrial trade policy of Kazakhstan to the benefit of domestic businesses.

Reporting by Assemgul Kassenova and Altynai Zhumzhumina, writing by Dinara Urazova

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