Kazakhstan: Central Bank intervenes to stabilize currency

Kazakhstan’s Central Bank just sold another $144 million in dollars from its reserves attempting to stabilize the tenge, blaming the 1.2% daily decline on the actions of “speculators.” Central Bank governor Kairat Kelimbetov allowed on August 20 of last month for the currency to float freely after the Chinese Central Bank allowed the yuan to decline relative to the dollar. The other factors at play are the large price declines in oil benchmarks, and the impact of sanctions on Kazakhstan’s biggest trading partner, Russia. The transition to a freely floating currency caused the value of the currency to plunge some 23% in one day, the most on record since the currency’s creation, and surpassing February 2014’s devaluation of roughly 19%.

Today’s sale of foreign exchange has stabilized the currency, but the issue has created unrest and popular anger at the Central Bank, and Mr. Kelimbetov in particular, who as recently as July had promised that there would be no additional devaluations. Kelimbetov argued that few within Kazakhstan would actually suffer as a result of the decline, remarking that 75% of savings accounts are denominated in dollars, and most businesses external debt (some 70%) was denominated in the tenge, meaning that both sides will see appreciation and savings. However, this will also lead to rampant inflation and any income in the future will be subject to this increasing trend.

But this market-driven approach has little sway in Kazakhstan, where the culture is still predominately Soviet. Nazarbayev’s regime is likely attempting to manage the situation so as not to repeat the oil worker’s strike in Zhanaozen in 2011, which ended in bloody clashes that left country in deep fear of social unrest.

Follow us on Twitter: @SteppeDispatch

News Briefs: 

  • Uzbekistan has increased tariffs on natural gas, with the new rates effective October 2015, according to a statement by Uzbekneftgaz. The intra-Uzbek rate is now 7.3% higher, marking the second rate increase this year alone (the last was in May 2015) on natural gas. This move is unlikely to be politically motivated, as tarriffs on central heating, air conditioning, and water cooling, as well as electricity, increased by 8% and 5.2% respectively.
  • Uzbekistan is also coming under fire for its yearly use of forced labor in the cotton harvest, one of its largest exports. Human rights organizations and governments are condemning the practice, which forces all citizens regardless of occupation, age, gender, or any other qualifying factor to abandon their work to focus on the harvest. The archaic practice has led to some disruption in social services, and additionally is unlikely to bring in much revenue this year due to the huge amount of cotton in storage in China currently, which has been building up a stockpile.
  • Turkmenistan has pledged it will begin construction on the longstanding TAPI (Turkemnistan-Afghanistan-Pakistan-India) pipeline by December, which so far will be led by a consortium of Turkmen state companies and assistance from international oil and gas companies – while there have been periodic flickers of interest from the likes of Chevron and Total, the substandard cost of oil and gas benchmarks has made the likelihood of capital investment in a project of TAPI’s risk and scope extremely limited.
  • Tajikistan has supposedly “liquidated” the terrorist group that it says was behind the bombings last week in Dushanbe, allegedly led by former Deputy Defense Minister Abduhalim Nazarzoda during a battle in the Romit Gorge area. Tajik officials blamed Nazarzoda and his fighters for attacks at the beginning of September against a police station near Dushanbe that caused the deaths of some 26 combatants.
Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s