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President of Kazakhstan Nursultan Nazarbayev has urged exporters to help ensure the country's foreign currency earnings, Tengrinews reports.
President of Kazakhstan Nursultan Nazarbayev has urged exporters to help ensure the country's foreign currency earnings, Tengrinews reports.
"I want to appeal to all our exporters: help the government and try providing the country with foreign currency revenues given the new exchange rate," Nazarbayev said during the meeting with the business community in Akorda.
Foreign exchange earnings are the profits obtained through selling goods and services at the global market. Kazakhstan gets most of its profits from selling energy products and metals abroad. Oil, gas and metals constitute 75% of the entire export of the country. Had Kazakhstan continued to support the tenge exchange rate within the set band, it would have undermined its GDP growth, since Kazakhstan sells all it exports for dollars.
With oil prices sliding, Kazakhstan was expect much less revenues in dollars and therefore in tenge. So on Thursday August 20 last week, Kazakhstani government announced its decision to abandon the fixed exchange rate of its currency for a floating exchange rate, which immediately led to a 23-percent depreciation of the tenge that peaked as a 36% depreciation the next day. After the devaluation, Kazakhstan’s revenues in tenge actually increased.
During the meeting Nazarbayev said that the government was in a difficult position and asked the companies to sell their foreign currency inside the country and not abroad. This came amidst Kazakhstan’s efforts to adjust its economic plans to oil prices of $30 to $40 per barrel. The recent devaluation of the Chinese yuan and economic hardships in the neighboring Russia also negatively affected the situation in Kazakhstan.
Selling dollars in Kazakhstan will drive the dollar’s price down and that of tenge – up. This is directly related to the fact that after the government decided to float the exchange rate, it will be determined by supply and demand on the forex market.
By Dinara Urazova, editing by Tatyana Kuzmina
