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Tenge devaluation in Kazakhstan, statement and reactions

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Tenge devaluation in Kazakhstan, statement and reactions

On February 11, 2014 Kazakhstan devalued its national currency - the tenge -- by nearly 20%. Here is what the central bank says and what the population thinks.

"Today the National Banks has decided to stop supporting the tenge exchange rate at its previous level that made 155.6 tenge per dollar yesterday. We believe that the new equilibrium exchange rate should be set to 185 tenge per dollar.
"The national bank has set a corridor for the exchange rate to float in to plus minus three tenge from the new rate of 185 tenge per dollar, Kairat Kelimbetov, Governor of the National Bank of Kazakhstan said at the press-briefing in Almaty on February 11.

When asked about what they expected from the devaluation people in the streets of Astana said:

"Well, what I think is that all the prices will go up. They already have. Cost of food and public transport fares. But our wages are the same as before," a woman said.

"Those who have bank loans are fortunate, inflation is coming. What concerns prices, I don't know, cars will grow in prices and all the equipment, it all comes from abroad and is paid for in dollars. Well, anyway, I've got a loan to repay and this will help me repay it faster. Besides, there is a rumor that the ruble will go down, too," a man said.

"Everything will become more expensive. Prices will spike. Pensions were increased by 7% not long ago, but after that power and water rates went up and downplayed the increase," an elderly woman said.

"We were promised a 29% increase in our wages starting June 2015, but now, before this could even happen we get the devaluation. Just when things were starting to brighten up... now we will have to find some way to cope with it. We will have to survive... again", two women, most probably school teachers, said.

The central bank of Kazakhstan gave the following reasons for the one step devaluation of the tenge:

"First, The situation in all the developing countries, in particular in Brazil, Russia, India, China and South Africa, suggest weakening of their currencies against US dollar.

"Second, there remains an uncertainty over the exchange rate of the Russian Ruble. You can remember that in 2013 the Ruble weakened by 7% against dollar and this January the weakening continued.

"Third, the condition of Kazakhstan's balance of payments. Although our current account remains in black, we are witnessing a growth of import.

"Forth, high devaluation expectations in the economy accompanied by a intensification of speculations at the forex market which compelled the National Bank to interferer into the market on a regular basis.

"Fifth, there are preconditions in our economy that give reason to expect the inflation to be within 3-4% in the mid-term perspective.

"All these adjustments have been made to improve the competitiveness of the tenge exchange rate and consequently improve the competitiveness of the local producers," Kairat Kelimbetov concluded.

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