Newly printed 20-thousand tenge notes exceed current amount of Kazakhstan cash 2.5-fold24 december 2013, 18:26
The total value of all the 20-thousand tenge notes printed in Kazakhstan makes around 4 trillion tenge ($26 billion), Olzhas Khudaibergenov, Head of Macroeconomic Research Center, told Tengrinews.
20-thousand tenge notes were initially printed to commemorate the anniversary of Kazakhstan's independence and were expected to be released before the year end. But at the press-conference on December 18, Kairat Kelimbetov, Governor of the Kazakhstan National Bank, declared that 20-thousand tenge bills will not be released into circulation in the nearest future.
Central Bank Governor Kairat Kelimbetov. ©pm.kz
According to the central bank, the reason for the change of mind is related to the expectation that the release of the 20-thousand tenge notes will fuel the devaluation expectations of the Kazakhstan population that are excessively high already. Besides, the release might cause an inflation spike.
Kelimbetov reminded that production of the 20-thousand tenge bills cost more than 2 billion tenge ($13 million) to the Government.
"Since the total cost of the newly printed 20-thousand tenge bills makes 2 billion tenge ($13 million) and the cost of one note amount to around 10 tenge ($0.6), we can calculate that the total of 200 million notes have been printed. This means that their total value makes 4 trillion tenge ($26 billion). This is almost 2.5 times the current amount of cash circulating in the country’s economy," Khudaibergenov said.
20-thousand tenge note. ©tengrinews.kz
The amount of Kazakhstan currency in circulation makes 1.5 trillion tenge ($9.7 billion). According to the expert, release of 4 trillion tenge ($26 billion) into the Kazakhstan economy can indeed trigger a devastating inflation and cause a devaluation of tenge.
"If these calculations are correct, then it is not clear to me what was guiding the National Bank's top management when they were printing such amounts of money. 4 trillion tenge ($26 billion) - the total value of the printed 20-thousand tenge notes - is a huge amount," he pointed out.
Khudaibergenov believes that it was unprofessional for the National Bank to print the bills first and start thinking whether their needed the bills later.
Considering that Kazakhstan's money supply makes 5% of its GDP, there is no need to increase the amount of currency in circulation, or to introduce new notes of larger face value, the export believes.
According to Khudaibergenov this ludicrous situation will not affect Kelimbetov's reputation as the new Governor of National Bank. "This question should be addressed to his predecessor. However Grigory Marchenko (the previous Governor) is not the kind of person known for thoughtless decisions," he added.
Olzhas Khudaibergenov. Photo courtesy of cmi.kz
Zhannur Ashigaly, senior analyst of Agency for Investments Efficiency Study, believes that the situation is a result of the recent change in the National Bank's top-management: the new team and the the old one have different vision of things.
"I think we shouldn’t take this for lack of professionalism or lack of coordination. It is just two teams that have different view on the situation," Ashigaly explained.
"After the repeated waves of anxiety over a potential devaluation that in many cases were provoked by the media and had no real economically grounds, the mood of the population is such that emission of the 20-thousand tenge bills into circulation can indeed provoke another splash of devaluation expectations among the Kazakhstan citizens," the analyst said.
However, he believes it premature to say that the new 20-thousand tenge notes will never see the light.