Kazakh central bank tries to calm devaluation fears

By bne IntelliNews October 22, 2014

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Kairat Kelimbetov, head of Kazakhstan's central bank, has denied there are plans to devalue the national currency amid the falling oil prices and Russian ruble. One of his advisers suggested earlier that authorities would not dare to drop the value of the tenge for the second time in a year for political reasons.

Kelimbetov told a news conference in Astana on October 21 that a 19% devaluation in February had given the tenge a "very powerful" cushion. "In turn, I believe there is no reason for concern. The cushion given [to the tenge] by the February devaluation is very powerful," he said in remarks carried by Tengrinews.

Rumours about a "second wave" of devaluation have been circulating in Almaty, the country's commercial capital, since the National Bank decided to devalue the tenge in February after it had spent billions of dollars on defending it in late 2013 and early 2014. The February devaluation was prompted by the gradual depreciation of the Russian ruble in 2013. Russia is Kazakhstan's main supplier, accounting for over a third of its imports.

Kelimbetov defended a new trading corridor of KZT170-188 to the dollar the National Bank set on September 10 to enable the tenge to strengthen to dispel devaluation rumours. The Kazakh currency has since strengthened from KZT182 to KZT181.34 to the dollar.

The chairman of the National Bank explained that the country's forex and gold reserves exceeding $100bn was an "enormous" reserve with which to defend the value of the tenge. Kelimbetov dodged the question whether he would resign should there be another devaluation. "There is very clear responsibility of the National Bank for a policy it conducts based on the economic situation, current account balance and the situation on the currency market," Kelimbetov replied. "I believe the National Bank is responding very clearly to challenges we are facing."

On October 16 Kelimbetov's adviser Olzhas Khudaybergenov explained  a general "atmosphere of mistrust in government and scepticism" had given rise to the devaluation rumours in Kazakhstan. Writing on his Facebook page Khudaybergenov admitted that a fall in global oil prices to $60 per barrel might push the value of the tenge down but ruled out a second devaluation of the tenge this year. "It's absolutely unfavourable for authorities to repeat a devaluation this year because this situation raises a question about the stability of the entire financial system," he said. "Not only will this set a precedent but will also create a risk of social protests."

On October 20 Khudaybergenov told Tengrinews that he would resign as Kelimbetov's adviser because his opinion as a National Bank official was "controversial". "I've decided not to extend my contract from January 1, 2015, of which I've notified the management and explained my motives in detail," Khudaybergenov said. "On the other hand, I've preserved a right to be a freelance adviser, which means I will have an opportunity to regularly meet Mr Kelimbetov and suggest decisions bypassing usual bureaucratic procedures."

Khudaybergenov was appointed Kelimbetov's adviser in January 2014. Kelimbetov became head of Kazakhstan's central bank in October 2013.

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