Kazakhstan’s embattled currency has continued its downward slide to hit fresh lows after the dismissal of the central bank chief this week failed to restore market confidence in the tenge.
The latest drop came after the National Bank of Kazakhstan announced late on November 5 that it would stop propping up the tenge and let market forces decide the rate.
The currency fell to 307 to the dollar on November 6, a significant but not precipitous 2.5 percent fall on the previous day.
However, the tenge has fallen by 10 percent overall in the five days since President Nursultan Nazarbayev fired Kayrat Kelimbetov as chairman of the National Bank and replaced him with Daniyar Akishev — a move Nazarbayev said aimed to restore confidence in the ailing currency.
The tenge has now lost 64 percent of its value against the dollar since August, when the National Bank abandoned its policy of maintaining it in a managed corridor — a strategy Kelimbetov inherited from his predecessor, Georgiy Marchenko.
Under pressure from external forces ranging from the depreciation of Russia’s ruble to the fall in global oil prices, the tenge fell sharply in mid-September, prompting the National Bank to step in again to prop it up.
As of November 5, it has once more abandoned that policy, the central bank said in a statement, and decided on “the minimization of its participation in the currency market” in order to preserve hard currency reserves.
In propping up the tenge in September and October, the bank had “stepped back” from the free-float policy, it acknowledged, with currency interventions that had cost it $5 billion.
That is on top of the $28 billion it had previously spent defending the tenge in 2014 and 2015.
The latest currency woes sparked unusual consternation in Kazakhstan’s rubber stamp parliament on November 6, as MPs discussed a national budget covering the next three years. A vote on the budget is due at the next sitting of parliament on November 9.
“The situation is extremely complicated,” said Gulzhan Karagusova, head of the lower house’s Budget and Finance Committee, in remarks quoted by Tengri News. “At first we thought the correction [in the tenge rate] would bring more money, but this correction is bringing extra costs.”
As Karagusova, a loyal member of Nazarbayev’s ruling Nur Otan party, like most other MPs, pointed out, almost all enterprises — even the energy and industrial exporters that the devaluation was supposed to benefit — have hard-currency costs that have rocketed with the depreciation of the tenge.
“The situation is very alarming,” said deputy Finance Minister Lena Karmazina. “There are pluses [to currency depreciation], but there are more minuses, because we have a lot of costs linked to the exchange rate and to foreign currencies.”
The economy ministry is urgently reviewing socioeconomic forecasts with a view to amending the draft three-year budget on which MPs are supposed to vote, she said.