Nazarbayev instructs National Bank to compensate tenge deposits21 august 2015, 15:24
On August 20, Kazakhstan floated the tenge triggering a 25% dollar-tenge exchange rate spike.
Things started going out of hand when on August 19 Kazakhstani banks shocked the oil county's population by setting the exchange rate to 194 tenge per 1 USD - a 3.5% increase from the previous exchange rate. The following day the currency exchange rate spiked to over 250 tenge per 1 USD plunging locals in near panic.
To ease the tension and get people more trustful of the government President Nazarbayev announced on August 20 that the currency exchange rate difference would be compensated for tenge-denominated deposits.
The compensation applies only to the amount of up to one million tenge (around $4000) per a deposit. Larger deposits will not get the full compensation of the exchange rate difference. He did not specify when the mechanism will be put in place or which exchange rate level would be used as the ceiling benchmark for the compensation, but it was still a good news in bad times for 1.7 million people who would be covered by the initiative.
The 19% devaluation of 2014 is still fresh in the memories of Kazakhstanis whose tenge deposits and salaries considerably lost their paying capacities. An SMS-campaign that followed the devaluation set a wave of panic and Kazakhstanis withdrew over $290 million from deposits in tenge. According to Socialismkz.info, Kazakhstanis lost 8.1% on their tenge deposits that year.
To remedy the situation the government increased salaries, pensions and scholarships for students by 10% in the following months. Some companies followed suit in an attempt to lessen the impact of the devaluation on their employees. Later, with government’s reassurance that there would not be another drastic devaluation any time soon, Kazakhstanis returned their money to the banks in tenge. In the beginning of 2015, tenge deposits went up in comparison to the same period last year.
According to the National Bank, as of July 1, 2015, the total amount of private fixed-term deposits exceeded 1 trillion tenge.
At the August 18 exchange rate (188 tenge per $1), the deposits made $5.67 billion in dollar equivalent. Whereas the new currency rate (250 tenge per $1) decreased the deposits to $4.26 billion. This means that Kazakhstanis lost $1.41 billion in paying capacity thanks to the free-floating tenge policy.
"I instruct the National Bank to initiate a mechanism of compensation for private fixed-term deposits in tenge. This applies to the deposits open as of August 18, 2015 (…) We use that day's exchange rate and amount on deposits of up to one million tenge (...). Citizens will be compensated on the currency rate difference based on the old exchange rate under the condition that they roll over to special accounts and retain the money in the banks for at least one year. This measure will enable us to support 1.7 million people and cover 86% of all the deposits," Nazarbayev said.
By Gyuzel Kamalova, editing by Tatyana Kuzmina (Aizhan Tugelbayeva contributed to the story)