1. Main
  2. Learn
  3. Economy
  4. Markets

Oil prices and currency rates approach alarming levels for Kazakhstan

©REUTERS ©REUTERS

The current situation on the oil market is critical for many countries exporting crude, including Kazakhstan, Tengrinews correspondent cites Anna Kokoreva, a financial analyst from Alpari.

Oil prices are continually sliding down. Brent has hit through the floor of $84 per barrel and is now sold at $83.37, which is a dramatic decline against the June high of $112 per barrel.

Saudi Arabia declared that it was not intending on cutting its oil production. Kuwait and Iran also made it clear they were going to keep the current production rate. In the meanwhile, the United States have sharply increased their output thanks to the shale boom, making the country a global oil production leader. All these contribution to the oil prices avalanche.

Kokoreva said that each country had its own critical point in term of oil prices, but most of the countries planned their budgets with the corridor of $80 to $90 per barrel in mind.

The existing trends might force the National Bank of Kazakhstan to depreciate the tenge against the dollar by about 2-3%, Kokoreva said.

Kazakhstan is keeping its tenge exchange rate in managed float - pegged to the corridor of 185 tenge per dollar +3/-15 tenge. 3% equals to 5.5 tenge. With the exchange rate currently at 183.5 tenge per dollar, Kokoreva is not talking about any immediate changes in the corridor or a new massive devaluation of the tenge in Kazakhstan. However, she obviously does not preclude the possibility in a longer run.

According to the Russian expert, there is no point for Kazakhstan in supporting the tenge exchange rate amid the plunging oil prices, strengthening of the dollar and weakening of the Russian ruble - Russia is Kazakhstan's main trade partner, and oil traded in dollars is Kazakhstan's main exported commodity fuelling its economy.

If the situation persists, it might become necessity to compensate for losses and state budget deficit to balance the economy, she said, adding that Kazakhstani producers using imported raw materials would be the first to suffer the currency exchange blow.

"Amid the persisting bear trend at the oil market, the government of Kazakhstan may have to cut its budget spending," the analyst said.

Last month, the Governor of the National Bank of Kazakhstan Kairat Kelimbetov said that “the oil price of $90 per barrel would be the signal to make a new decision on the fate of the tenge” and that “the price of $80 would affect the country’s balance of payments”.

Kelimbetov admitted that Kazakhstan citizens would have a good reason to worry about a new devaluation should the oil price drop to $80 per barrel and the exchange rate of the Russian ruble hit the low of 43 rubles per $1.

The Russian ruble exchange rate is already at 40.8 per $1 in spite of Russia's heavy monetary interventions of the recent weeks. This is too close to the benchmark indicated by Governor Kelimbetov to spell anything good for Kazakhstan. 

In today's downslide of oil prices, Brent crude futures (LCOc1) fell to a new four-year low of $83.95 per barrel and U.S. crude oil (CLc1) fell to $80.60 per barrel, virtually hitting the $80 alarm button set by Governor Kelimbetov.

Oil prices going this low are inspiring fears of inflation all over the world, not just in Kazakhstan.

Writing by Tatyana Kuzmina and Dinara Urazova (Additional reporting by Azhar Ashirova) 

Nobel prizewinner proposes a new city in KZ
New abnormal snowfalls expected in Kazakhstan
Huge glacier retreat triggered in 1940s
Hyperloop construction begins in Las Vegas
"Moonlight" to top Spirit Awards nominations
Oil prices fall due to investors uncertainty
New dwarf galaxy discovered around Milky Way
Kanat Islam becomes a top ten WBO boxer
World oil prices continue to rise
Kazakhstan expects warming - Kazhydromet
Merkel to seek fourth term as chancellor
Sale of Tintin drawings set to break records
US, EU stocks fall as markets focus on dollar
Pacific leaders urged to defend free trade
EU warns eight nations on budget deficit
Universiade-2017: Athletic Village is ready
Bob Dylan can't make Nobel ceremony
Messi will never leave Barca - club president
Google, Facebook take aim at 'fake' news
Aerosmith announces Europe 'farewell' tour
Putin, Trump to normalise US-Russia ties
At least 10 hurt in southern Turkey blast
6.2 quake hits western Japan
OPEC agrees shock oil output cut
Israeli ex-president and Nobel laureate Peres dies
Germany blocks WhatsApp data transfers to Facebook
32,000 arrested in Turkey coup probe
Youth to the fore as Milan fashion week opens
Xenophobia threatening peace in eastern Germany
Four-in-10 Japanese are virgins: poll
Sweden re-militarises Baltic island of Gotland
China to launch second space laboratory: Xinhua
More than a billion stars mapped in Milky Way: ESA
Boxing: Golovkin eyes Saunders after stopping Brook
Kazakhstan shifts PM to security chief
Oil prices gain despite rising OPEC supply forecast
US to give Philippines military planes
Singapore wages war on Zika-bearing mosquitoes
Italy quake death toll nears 250
Viral photos add fuel to French burkini debate
18 dead as Italy struck by powerful quake
Japan's first lady visits Pearl Harbor
Pokemon's a no-go on Bangkok's roads
July was Earth's hottest month in modern times
Pakistan rock climbers scale new heights