Weaker tenge to boost economy: Kazakh president

Nazarbayev: Eyeing extra revenues.

Reuters/Almaty

The devaluation of the Kazakh tenge was a boon for the country’s fast-growing economy, Kazakhstan President Nursultan Nazarbayev said yesterday, but he also told the central bank to keep the currency stable within its new exchange range.

The central bank devalued the tenge on Tuesday by 19% from the mid-point of its trading corridor. It was trying to prevent large-scale foreign-exchange speculation and adjust to a freer rouble float in Russia, Kazakhstan’s main trading partner.

“Our economy will reap extra revenues, and in general this will have a positive effect on its further growth. That was our task, and therefore such a decision was taken,” Nazarbayev’s press service quoted him as telling National Bank Governor Kairat Kelimbetov and Prime Minister Serik Akhmetov.

The remarks were the first by Nazarbayev after the devaluation. The 73-year-old leader has been in power for more than two decades, and his word is final in the mineral-rich nation of 17mn. He told Kelimbetov to keep the tenge within its new range of 185 tenge per dollar plus/minus 3 tenge.

Kelimbetov said earlier that Kazakhstan’s economy was forecast to grow slightly faster this year and inflation would increase, as the devaluation of the tenge was expected to fuel exports and budget revenues.

The devaluation shocked big banks and small businesses, Kelimbetov said, but market agitation was subsiding. ‘Buy’ rates at exchange offices had soared to 215 tenge per dollar on Tuesday, he said, from Monday’s official rate of 155.56 per dollar.

The official central bank rate was set at 184.50 tenge per dollar. On Wednesday, exchange offices in the centre of Kazakhstan’s commercial capital, Almaty, were buying the dollar for 182.7-183 tenge. Trading volume was a moderate $142mn on the Kazakhstan Stock Exchange.

“You should not allow any agitation or react to speculations,” Nazarbayev told the central banker and premier.

Kelimbetov, speaking earlier at a news conference, said he hoped that inflation would be kept within an official target of 6 to 8% this year. Consumer price growth slowed to 4.8% last year from 6% in 2012.

“We believe we will be able to achieve a lower tempo of growth in imports, compared to what we had had before we took this decision (to devalue the tenge),” he said. “We believe that exports will grow, that the balance of payments will improve, that economic growth will exceed 6%, that more jobs will be created and that we will reap more tax revenues for the budget.”

The economy grew 6% in 2013 and 5% in 2012. The vast Central Asian nation is the second-largest post-Soviet economy and the second-largest oil producer after Russia. Its exports are dominated by oil and industrial metals, and fluctuating prices for the metals have cut into Kazakhstan’s current account surplus.

Preliminary central bank data show the surplus shrank to $118mn last year from $640mn in 2012. The foreign trade surplus is estimated to have fallen by 10.6% to $33.8bn in 2013.

Kelimbetov said the central bank had spent some $6.4bn on interventions on the forex market since mid-2013 to suppress what he called “high devaluation expectations”. The central bank said on Tuesday it would now ease its grip on the tenge and reduce currency interventions on the market.

“If you keep in mind that net gold and foreign currency reserves comprise just over $24bn, partly in gold, then, of course, this situation caused certain concerns,” he said.

Central bank data show that gold accounts for a quarter of Kazakhstan’s net gold and foreign currency reserves.

Taking into account the National Fund, which collects windfall revenues from oil exports, Kazakhstan’s total international reserves stood at $95.1bn on January 31.