Kazakh officials reject speculation of forthcoming devaluation

By bne IntelliNews July 29, 2013

bne -

Kazakh officials sought on July 26 to allay fears that the country is heading for a devaluation of the currency. The rumours of a fall in the tenge were largely sparked by the decision to issue new KZT20,000 notes - twice the value of the previous highest denomination.

Following a meeting with Grigoriy Marchenko, governor of the National Bank of Kazakhstan, President Nursultan Nazarbayev insisted in a statement published on the presidential website Akorda.kz that there are no grounds for panic over the tenge. The head of state said: "Given the volume of foreign exchange reserves, as well as the pace of development of the national economy, there is no reason for the devaluation of the national currency."

Marchenko had previously addressed rumours of a possible devaluation in an online conference organised by ProFinance.kz on July 25. "The National Bank wants to once again refute rumors of possible devaluation of the tenge, Kazakhstan's national currency; such rumors are deliberately spread to serve interests of some groups," Marchenko said, according to Tengrinews.

Kazakhstan devalued the tenge in Ferbuary 2009, with the currency dropping 18%. Rumours of another such devaluation have done the rounds ever since, the central bank governor added.

He noted however, that the previous drop for the currency followed a 40% depreciation in the Russian ruble - which has a larger impact on the tenge's stability than other international currencies. "Currently, fluctuations of the Russian rouble are insignificant. A short-term depreciation of the Russian ruble a month ago is over... and has no effect on the Kazakh tenge," Marchenko's statement continued.

The banking chief explicitly denied that the plan to issue a commemorative 20,000 tenge banknote is connected to any expectation of a sharp movement for the currency. "The issue has nothing to do with devaluation. The new note is being issued to celebrate the 20th anniversary of the tenge," he said.

Currently, the KZT10,000 note is the largest in Kazakhstan and the step up is simply necessary, Marchenko insisted, going on to note that he favours the introduction of a 50,000 tenge note as well. "Given that the average salary in Kazakhstan stands at KZT105 000, we should have a KZT50,000 note. With the KZT20,000 note, the range of notes in terms of par value will only be enhanced," the bank chief said.

Kazakhstan's economy grew by 5.1% in the first half of 2013, according to government data, despite slowdowns in some of its main trading partners. At 5.9%, inflation in 2013 was below the forecast of 6-8%. Economy Minister Erbolat Dossayev told a government meeting on July 23 that international reserves increased by 4.1% in the first half of 2013, to reach $89.6bn. Meanwhile, the National Fund, where windfall oil revenues are accumulated, was up 9.8% in January-June 2013 to $63.5bn.

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