Daniyar Akishev, head of the National Bank of Kazakhstan, said at a news conference on January 21 that the interest rate for tenge deposits would be increased to 14% and no capital controls would be introduced as the national currency reached a record low of KZT384.48 against the dollar the same day.
The statement is aimed to calm down the market, which started to be nervous again, after Azerbaijan, another oil producer in the region, closed down foreign exchange booths outside the formal banking system and imposed capital controls, making the outflow of foreign currency more costly and difficult. The other factors that are worrying the market are the declining oil price and the new lows the tenge is hitting every day. The market might be also afraid of a potential instability stemming from the election campaign as in an authoritarian system the voting process creates risks of internal destabilisation, especially during the economic crisis. The lack of public trust in the regulator might undermine the efforts that aim to calm down the market.
According to Akishev, the ceiling on the interest rate on retail tenge deposits will be raised from the current 10% to 14% from February 1. At the same time, the interests rate ceiling on dollar-denominated deposits will be lowered from the current 3% to 2% (the interest on euro-denominated deposits is 0%) in order to discourage the population from keeping savings in dollars. The NBK might further raise the ceilings for deposits denominated in the local currency, Akishev revealed. The measures, however, might not be enough to attract depositors who may instead keep the money in foreign currency under matrasses.
According to the NBK, deposits in the national currency fell by 4.8% y/y to KZT4.95tn (€1.18bn) in 2015, while deposits in foreign currency jumped by 69.6% to KZT11tn. The jump in foreign currency deposits may be attributed to the depreciation of the tenge which lost nearly 50% of its value since it was allowed to float freely in August. The share of tenge-denominated deposits decreased from 44.5% to 31%, including retail deposits from 32.7% to 21.1%.
Retail deposits decreased by 3.2% m/m in December, while retail deposits in foreign currency increased by 10.2% m/m in December.
The governor also said that the central bank aimed to reduce its participation in the long-term foreign exchange swaps. Moreover, the bank intends to impose no limits on deposit withdrawal or currency exchange operations (as happened in Azerbaijan). According to Akishev, there is the insignificant likelihood of strong exchange rate movements in the near future.
Akishev also tried to calm down the situation by stating that “the foreign exchange reserves of the National Fund and the National Bank that have reached 50% of GDP provide a necessary safety cushion to ensure the stability of the financial system under any scenario with oil prices”. The governor also said that the NBK will continue a free-floating exchange rate policy that was adopted on August 20, 2015.