UPDATED: Replacement of Kazakh central bank chief not seen solving “institutional” problems

By bne IntelliNews November 2, 2015

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Kazakhstan's Senate on November 2 approved the appointment of a new central bank chief after the previous incumbemt, Kairat Kelimbetov, was sacked by President Nursultan Nazarbayev over a loss of trust in the bank and national currency after two devaluations in the space of two years. However, observers warn the personnel change won’t solve problems in the country’s monetary policy, in particular, and the economy, in general, as these problems are “institutional”.

The Senate, the upper chamber of the Kazakh parliament, approved the appointment of Daniyar Akishev as central bank governor, who previously was acting aide to the president and head of the presidential administration’s socioeconomic monitoring department.

Explaining the change to the Senate, Nazarbayev said: “Trust in the bank and the national currency, the tenge, is falling now and this should be prevented. The country is experience shortages of tenge liquidity and loaning to the economy is falling. These are bad indicators and we should work on correcting them. I am confident that Akishev’s education and experience will help him solve this task.”

Kelimbetov was appointed governor of the central bank on October 1, 2013, and oversaw two devaluations of the national currency – the first in February 2014 and the second in August 2014, when the tenge was allowed to float freely. As governor, Kelimbetov took much for the blame for the devaluations, which were a response to the deteriorating economic conditions due to poor government policies and low oil and metal prices.

However, Sabit Khakimzhanov, head of research at the Almaty-based investment bank Halyk Finance, doesn’t believe the problems surrounding monetary policy can be solved by replacing people at the top of the National Bank of Kazakhstan. “I don’t think the main problem of the monetary policy is linked to personality. The replacement of the head [of the central bank] is not the solution to a key problem,” Khakimzhanov tells bne IntelliNews. “The main problem is that the National Bank as an institution is not sufficiently independent - its decisions heavily depend on the government.”

The analyst says the inability of the central bank to independently run its business and resources - for example setting wages for its staff - prevents it from attracting sufficient numbers of well-qualified specialists. This influences the quality of decisions it takes and its ability to conduct correct monetary policy. “In part, the lack of independence is linked to the lack of qualifications,” he says.

“I don’t think we should be preoccupied with personalities,” Khakimzhanov said about Akishev’s appointment as the new governor. “We pay a lot of attention to the top management, whereas the most important issues are the institution itself - decision-making mechanisms, mechanisms of fulfilling decisions, mechanisms isolating this institution from outside factors, for example the government’s influence, coordination of fiscal policy, general understanding of problems by the government and lack of the government’s understanding of the policy carried out by the National Bank.”

“We should be solving the problem at the institutional, not personnel level,” the analyst adds.

Noses out of joint

Analysts believe a reason behind Kelimbetov's sacking was that he lost a fight within elite circles after the bank resumed interventions in the exchange market in September to stop “speculative operations”, and started publishing information naming and shaming commercial banks.

“Members of the elite must have considered such a step as hostile, as he pointed fingers at owners of commercial banks who tried to move the exchange rate of the tenge,” Maksim Kaznacheyev, a politcal analyst, told the Kapital business broadsheet.

Another reason for Kelimbetov’s dismissal could be tied to the fight for the assets of the Single State Pension Fund amid the rapidly decreasing financial resources in the country. “These assets are being run by the National Bank and, as a result, the fight for the right to head the financial regulator has intensified,” Kaznacheyev concluded.

Speaking at the Astana Invest Forum, held on October 28-30, Kelimbetov boasted that the National Bank was now managing assets worth over $100bn. The bank also manages the assets of the Single State Pension Fund, which were worth KZT5.15tn (€16.8bn) as at September 1, up 14.6% from the year before.

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