Kazakhs are increasingly opting to keep their savings in the national currency as the tenge continues to strengthen on the back of higher oil prices. The trend is being further fuelled by rumours of an imminent ban on the circulation of foreign currencies in the country.
According to figures published by the National Bank of Kazakhstan, the share of foreign currency-denominated retail deposits fell from a peak of 80.4% in January to 75.2% in March as total deposits decreased from KZT7.19tn ($19.71bn) to KZT6.94tn ($20.18bn). At the same time, the average weighted exchange rate of the tenge decreased from KZT364.79 in January to KZT343.62 to the dollar in March.
The central bank publishes the value of foreign currency-denominated retail deposits in tenge so it is hard to judge whether the decrease in the level of dollarisation is a result of the revaluation of retail deposits in foreign currency due to a change in the exchange rate or an actual decrease in such deposits.
Depositors that bne IntelliNews spoke to had different views on which currency to hold their savings in and this difference largely depends on the level of financial literacy among depositors and where they live.
Retail depositors in Almaty, the country’s financial centre and largest city, say that they haven’t rushed to convert their foreign currency-denominated deposits to tenge ones since the national currency started appreciating in January because they consider foreign currency as a long-term saving instrument and are not worried about swings in the exchange rate in the short term. “I use dollars for purchases in dollars, euros for purchases in euros and tenge for everyday local spending,” Madina Kyrykbayeva, an Almaty-based translator, tells bne IntelliNews.
Kyrykbayeva notes that in June 2015, in anticipation of a devaluation by the central bank she converted her tenge savings worth around KZT3.5mn (around $19,000 at the time) to foreign currency ahead of the announcement of a free-floating exchange regime for the tenge in August 2015, which led to a nearly 50% depreciation by the end of the year.
The move, she explains, was prompted by her previous experience when she lost around 20% of her tenge savings in dollar terms when the National Bank decided to devalue the tenge in February 2014.
In order to boost the attractiveness of tenge deposits, earlier this year authorities increased interest rates on tenge deposits from 10% to 14% a year and cut the interest on dollar deposits from 3% to 2% and on euro deposits to 0%. “I don’t expect a sharp devaluation of the tenge in the near future so I would not convert my tenge savings to dollars now,” says the translator, who earns in dollars, euros and tenge, noting that she has invested all her savings in property.
Other middle-class residents of Almaty echo Kyrykbayeva’s rationale. “I am not converting tenge to dollars or vice versa because I need tenge for local spending and foreign currency when I travel abroad,” an editor, who gave her name as Tanya, tells bne IntelliNews.
According to an analysis conducted by Ranking. kz, an economic monitoring website, the average size of retail deposits per person increased from KZT243,500 to KZT387,000 between March 2015 and March 2016. The highest average size of deposits was in Almaty at KZT2.1mn ($6,400), a 48.4% rise y/y. The lowest size of deposits was in rural southern regions: KZT77,600 ($235) in Zhambyl Region, KZT76,400 ($232) in South Kazakhstan Region and KZT59,800 ($181) in Almaty Region.
Many interviewees in Shymkent, the administrative centre of densely-populated rural South Kazakhstan and the country’s second largest city, say that they haven’t got any savings because they are living hand to mouth, but if they had, they would have kept them in tenge. “I trust in the tenge because I know it is the currency of our country and the dollar is not reliable. It is going down now and [rumours] say it will be banned altogether like in Russia,” one resident of Shymkent, who refused to give his name, tells bne IntelliNews. “China wants to promote its currency and will also stop using dollars.” Such a view is widespread every time the government talks of de-dollarising the economy or Russia-West relations hit new lows.
Following the deterioration of Russia’s relations with the West as a result of Moscow’s seizure of the Ukrainian region of Crimea in March 2014, Russian officials have suggested imposing re-strictions on the circulation of foreign currency and switching to rubles in bilateral trade. Although the Kazakh government has maintained that it will not limit the circulation of foreign currency in the country, Russia, whose media still exerts enormous influence in Kazakhstan, seems to be helping persuade some Kazakhs to abandon dollars.
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