No devaluation expecting tenge: Expert

By: Aynur Jafarova

The Kazakh government and the National Bank have recently issued a joint statement on the main directions of economic policy for 2015.

It was noted in the statement that the foreign exchange policy will not allow sharp fluctuations of exchange rate of Kazakhstan’s national currency tenge.

The foreign exchange policy of the country will be directed at ensuring a balance between internal and external competitiveness of Kazakhstan’s economy.

“Required measures will be taken to limit speculations on the foreign exchange market. The National Bank and the government will jointly change the legislation in 2015 by increasing the requirements for the exchange offices activities on the cash market,” the statement said.

The policy will be continued in 2015 to maintain the international reserves of the National Bank at an adequate level.

“Fixing the prices of goods and services in nominal units will be banned,” the document noted.

Judging by recent events in Kazakhstan, the experts predict that no devaluation is expected in the country in near future. However, one of the key ideas to overcome the country’s crisis is to reduce tenge’s dependence on the U.S. dollar.

“ Devaluation will bring more harm than advantages. Therefore, the authorities have no choice but to offer different solutions to the problem. In case of cancellation of the devaluation, and if it is issued on a joint statement of the National Bank and the government, the market will feel the seriousness of the statement. And then the devaluation possibility will weaken or even reset to zero, resulting in a gradual decline in the degree of dollarization of the financial system,” well-known Kazakh economist, adviser to the chairman of the National Bank Olzhas Khudaibergenov believes.

On December 21, Kazakh President Nursultan Nazarbayev made an appeal to the Kazakh people saying there is no ground for concern.

“I have already announced that the social obligations of the state will not be reduced. This is applied to pensions, salaries of employees of budgetary organizations, and other social payments. The population of Kazakhstan should not be worried. We have a plan for such a scenario if the oil price will stand at 70, 60, 50, 40 dollars per barrel. There are some reserves that can support the population and prevent the deterioration of their lives,” he noted.

The president also recalled that the bank deposits worth over 5 million tenges are guaranteed by the government, and a special fund has been established for this purpose.

Thus, the head of state assured that Kazakhstan will survive this crisis with minimal losses.

Measures are taken

Like Russia, there is a special fund in Kazakhstan, which accumulates the incomes from energy imports. This fund will allocate 1 trillion tenges (around $5.5 billion) in February next year to support the national economy. This fund will be directed to financing the business, improving the banking sector as well as construction infrastructure of free economic zones.

Also, $3 billion will be annually allocated to the implementation of new economic policy ‘Nurly Jol’ for three years, which is aimed at developing the transport-logistics, energy and industrial infrastructure.

It is expected that the international financial institutions will make assistance worth $9 billion to the country.

The government forecasts that the inflation will not exceed 6-8 percent. Also, sharp fluctuation of the national currency is not expected.

A number of measures are aimed at supporting tenge and decreasing the dependence of the national economy on dollar. In particular, the amount of deposits guaranteed by the government will be doubled. Now its amount is equal to 5 million tenges ($27,400). The government will also apply a ban on setting prices in conventional units.