Kazakhstan’s Central Bank Governor on tenge prospects

Kazakhstan’s Central Bank Governor Kairat Kelimbetov believes global prices for oil are set to grow within the following 5 years, a Tengrinews.kz journalist reports.

Following today’s sitting of the country’s Majilis (lower chamber) he reiterated that the current exchange rate of the tenge against the US Dollar reflects the true market value.

“What is going to happen next? (…) I believe all of you have been watching the neighboring Russia, whose currency, the rouble, once stood at 44 for USD1, devaluing to 80 for USD1 and rebouncing to 60 (…) Russian economy is more diversified, for Kazakhstan it would be hard to handle such a volatility. Therefore, the country’s Central Bank relies on currency interventions to keep the balance in the FX market. We believe the current exchange rate of 277 tenge for USD1 reflects the true market value and is the one the country’s economy benefits from”, Mr. Kelimbetov elaborated.

“When will the Kazakhstan’s economy be fully adjusted to the new economic landscape? Normally it takes about 6-12 months [following the decision to let the currency float freely] for a nation to get adjusted (…) The future fate of the tenge rests on a number of factors, global prices for oil being a major one. Should the price for oil stay at $50, the tenge’s exchange rate is likely to remain unchanged. The free float mode enables to absorb such factors as falling prices for oil and economic recession of neighboring economies. Should the global prices for oil grow – and they are deemed to grow within the following 3-5 years, the tenge will be appreciating”, he said.

“Due to falling global prices for hydrocarbons, budget revenues have dropped by 40%. Besides, global prices are falling for major Kazakhstan’s commodities such as iron ore, base metals, coal. The nation’s agriculture has been growing very insignificantly, with industrial production being on the decrease”, President Nazarbayev said October 19, 2015 when meeting the country’s PM Karim Massimov.

“Given the current state of the global economy, there could hardly be any forecast of economic upturn. Kazakhstan’s people should be aware of decreased revenues of Kazakhstan-based enterprises and possible lays off. We are approaching a more severe crisis than the one we faced back in 2007-2009. To this end, I task the Government to come up with an anti-crisis plan, think of needed measures», President said, adding that the gloomy conclusions are based on recent talks held in the USA and China and talks with the Russia’s Government.

From August 20 the National Bank and the Government decided to implement a new monetary policy based on inflation targeting and to renounce the earlier practiced currency corridor.

 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.