Nerves in Kazakhstan over the state of the national currency turned first to alarm, and now to pretty much outright panic.



Yielding to the inevitable, Prime Minister Karim Masimov announced on August in a special video message that the government would switch to a free-float currency exchange. The value of the tenge duly plummeted 26 percent against the dollar and was trading at 255 by the end of the day.



“On July 15 this year, the National Bank took a decision to widen the currency corridor in order to enable a more flexible and floating exchange rate for the tenge,” said Masimov. “But the situation on the global economy continues to worsen. The prices for the main export goods of our country — oil and metals — have continued to fall, which has had a negative effect on the economic growth.”



Masimov said a priority would be placed on shoring up social welfare, but such remarks will do little to stave off immediate reactions to the collapse of the currency.



TengriNews posted pictures online showing closed currency exchange points in Almaty, where traders are understandably concerned at making large losses in such uncertain times. Vedomosti newspaper reported that some are so desperate that they are offloading their tenge to buy Russian rubles, which is itself experiencing major tribulations, although in a more gradual manner than the tenge.



Alarm is spreading as well deepening as Kyrgyzstan’s som felt the shockwaves from its northern neighbor.



24.kg news website reported that the currency fell to about 70 against the dollar by 1 p.m. local time, down from around 62-64 earlier in the day. The tenge in turn fell from 3 to the som to 5, prompting exchangers to stop trading in the Kazakh currency.



Vladimir Gasyak, a former management director at Home Credit and Finance Bank Kazakhstan, told Business FM radio station that the decision to let the tenge float comes at the behest of the country’s grumbling exporters.



“Over the last half year, the change in the exchange rate in Russia has had an impact on Kazakhstan, because it now turns out that Russian wares cost less in Kazakhstan, which has been a detriment to Kazakh goods,” Gasyak said.

Traders in Kazakhstan were quick to start making adjustments. TengriNews reported that Internet retailers closed to recalculate their prices.



Konstantin Gorozhankin, president of the Kazakhstan Internet Business Association, said there were around 1,000 online retailers and that they had to change their price tags as they buy their goods in dollars.



“This devaluation is different from the last ones in that nobody understands what is going to happen to the exchange rate,” Gorozhankin said. “I don’t think they will stop working for a whole week, until the currency settles down. They will simple change the price displays every morning.”



Car dealers too closed shop to revise prices, TengriNews reported.



President Nursultan Nazarbayev met with senior businessmen in Astana on August 20 to discuss the current situation and was lavished with praise for the tenge decision.



“Nursultan Abishevich, this is a very important decision about the correction of the tenge, and we have objectively long been awaiting it. Maybe it could have been done earlier, but all the same, this is a great, great victory for us today,” Andrei Lavrentyev, head of Kazakhstan Automobile Business Association, was quoted as saying by Novosti-Kazakhstan news agency.



Blogger Yakov Fyodorov was caustic in describing the fulsome thanks offered by metals billionaire Alexander Machkevich.



“In the president’s live broadcast, Machkevich has beaten the absolute record for the amount of gratitude expressed for the new tenge rate. At least one person has it good,” Yakov Fyodorov tweeted.



Letting the tenge slide has certainly been an about-face, albeit one forced by events.



Nazarayev said the government has spent $28 billion since last year — and at least $10 billion in 2015 alone — trying to prop up the currency.



As of the start of August, Kazakhstan’s international reserves amounted to $97 billion, of which $29  billion are held as gold reserves by the National Bank, while another $68 billion are held in dollars in the National Fund, which is used as a stabilizing mechanism for the country’s economy.