Tenge depreciation concerns retirees
In light of recent events in the Kazakh exchange market and drastic depreciation of Kazakhstani currency - the tenge, the retirees of Kazakhstan are concerned about high rates of inflation and reduction in their pensions' purchasing power.
On September 16, 2015 Kairat Kelimbetov, Chairman of the National Bank of Kazakhstan, tried to dispel this concern. Kelimbetov believes that "dollarized mentality” of Kazakhstanis does not allow them to see the situation in the right perspective, Tengrinews reports citing Kelimbetov’s interview with Panorama.
He reminded that no country in the world guaranteed security of pension funds in dollar terms. He pointed out, however, that in Kazakhstan there was always a guarantee of security of pension funds against inflation. According to him, pension saving would suffer losses if inflation rate was higher than the return on the investment of pension funds.
"In Kazakhstan’s legislation there is a clear rule which says that if yields are below inflation rate and, to be honest, that was the case during the last 15 years, the difference is guaranteed via subsidies from the state budget,” the Chairman said. Kelimbetov also pointed out that the National Bank of Kazakhstan was working towards enhancing profitability of savings and reduction of inflation.
In August Kazakhstan switched to a floating exchange rate due to change in its economic policy. In just a few days tenge depreciated from 188 to 257 tenge for 1 US dollar (26% depreciation). Today, dollar equals to 270.69 tenge.
Should the 2 million retirees in Kazakhstan worry about their savings' purchasing power?
Officially the average monthly income of a Kazakhstani equals to 118,638 tenge ($440 at 1 USD = 270 KZT). The highest monthly pension is 73,000 tenge ($270) and the lowest pension is 34,900 tenge ($130), according to Minister of Health and Social Development of Kazakhstan Tamara Duysenova, as reported by KazTAG. To put it all in perspective, the poverty line in Kazakhstan is 21,364 tenge per month ($80), according to egov.kz. Needless to say that the quality of life reduces greatly once one becomes a retiree in Kazakhstan.
On the positive side, according to the recent statistical data, August inflation rate amounted to only 0.3%, or 1.8% if counting from January until September. Technically speaking, with a low inflation rate like this, retirees should not see a change (at least not yet) in their purchasing power however low their income may be.
"On the part of the Government there is a guarantee that they (pension savings) will not depreciate against domestic prices," Kalimbetov assured.
By Aidana Ramazanova, editing by Tatyana Kuzmina