Kazakhstan: Prices Keep Soaring, But Tenge Stabilizing
There is mixed news from Kazakhstan’s economy as consumers contend with a continued leap in prices for basic goods, while the national currency has returned to a stability of old, albeit with some help.
News agency Kazakh-Zerno reported earlier this month on some Economy Ministry comparisons of prices between March 2015 and the month before.
Sugar went up by 41 percent, butter by 24 percent, coffee and tea by 23 percent, seafood by 21 percent and bread by 20 percent. Meat has remained fairly stable, rising by a modest 4 percent.
In January, the government decided to stop subsidizing the production of bread as budget-cutting measure. Officials said that would save the treasury around 7-8 billion tenge ($21 million) annually.
The government did decide, however, to continue spending around 1.5 billion tenge per year on containing the cost of the cheapest types of bread as a way to prevent hardship for the most economically vulnerable sections of the population.
The devaluation of the national currency has also made it punitively pricey for Kazakhstanis to travel abroad.
KTK TV channel reported that in March airline tickets went up by 11 percent and train tickets increased 6 percent.
Even getting sick is becoming unaffordable. The average cost of medicine has increased by 9.5 percent over the past month, KTK reported, citing official data.
This particular price rise is the most cruel since those most in need of medication, the elderly, are the least well-equipped to afford it. A recent report by economic monitoring unit Ranking.kz found that the number of employed people above pension age doubled in 2015, which indicates that more people are choosing to keep working instead of relying on pensions.
Inflation in Kazakhstan hit 13.6 percent in 2015, up from 7.4 percent the year before. Inflation already reached 3 percent in the first three months of 2016, although the head of the National Bank of Kazakhstan, Daniyar Akishev, insists the annual rate will be no higher than 8 percent. The government’s goal is keep inflation in the 6-8 percent corridor in the coming two years and then gradually ease it downward to 3-4 percent by 2020.
On the currency front, Akishev has continued to preside over a loose interpretation of the free-float policy announced in August, since when the tenge has lost half its value against the dollar.
In an interview to Reuters on April 6, Akishev revealed that the national bank had bought $1.2 billion in March to keep the tenge from regaining value too fast. That was two-and-a-half times as much as the $474 million bought the month before.
Akishev said that rapid strengthening of the tenge was down to external factors such as the return to stability in oil prices and the Russian ruble, as well as internal ones like high demand for tenge deposits.
Many had linked the recent stable fortunes of the tenge to the March 20 parliamentary elections — an assumption that appears to have been borne out by the revelations about the scale of national bank interventions.
In addition to creating a serene backdrop for the vote, the interventions appear to have nudged savers into increasingly holdings their money in tenge deposits. Ranking.kz has found that amount of tenge deposits increased by 8 percent in February, while those in other denominations have fallen by 5 percent.
Akishev told Reuters that March was marked by a marked imbalance in the low demand and yet high supply of foreign currency.
The seeds for this trend were set a few months back.
In late 2015, the Kazakhstan Deposit Insurance Fund resolved to hike interest funds for newly accepted bank deposits to 14 percent from 10 percent for tenge deposits, while dropping them to 2 percent of 3 percent for foreign currency deposits.