Kazakh salaries hiked in bid to halt devaluation protests

By bne IntelliNews February 17, 2014

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In a bid to diffuse growing protest over the recent devaluation of the tenge, the Kazakh government said it will raise public sector salaries. It has urged major employers to do the same.

Around 200 people demonstrated against the devaluation in Almaty, the country's former capital and largest city, on February 15. Police initially allowed the demonstration to take place, but moved in to break it up as the crowd approached Republic Square, where the city government is located. Around 30 people were arrested, according to reports.

Almaty has seen a series of protests since the devaluation was announced on February 11, with the demonstrators complaining that living standards are already suffering. Public protest is rare in Kazakhstan, where political activity is tightly controlled; a turnout of 200 is therefore relatively high.

There are also other signs of wider dissatisfaction, with increasingly outspoken criticism of the government via social media. According to Eurasianet, some demonstrators on February 15 shouted "Shal, ket!", meaning "Out, old man" in Kazakh - a reference to President Nursultan Nazarbayev who has ruled the country with an iron fist since independence in 1991.

The government and central bank have defended the devaluation. Top officials, including central bank governor Kairat Kelimbetov, have sought to assure the population that it was a necessary step and that no further devaluations are expected.

Nazarbayev told a government session on February 14 that the move would contribute to an economic expansion of 6% this year. However, Astana has also been quick to react to the anger provoked, and on February 14 offered to soften the blow by raising public salaries, a move that was not thought to be on the cards earlier last week.

The National Bank of the Republic of Kazakhstan (NBRK) surprised on February 11 as it announced it would no longer maintain the tenge in a range of KZT145 - KZT155 to the dollar, and allow it instead to trade at around KZT185, with a range of plus or minus KZT3. Pressure for a devaluation had been growing, due to the wider emerging market sell off over the past year or so. Unlike others in the neighbourhood such as Russia however, Kazakhstan resisted allowing its currency to decline.

The sudden devaluation meant the population saw an instant and painful drop in their purchasing power. The government sought to keep that in check by insisting it would keep a close eye on retailers and clamp down on any sign of gouging. However, that appeared to make little difference, as many chains shut up shop the same day as the announcement in order to re-price stock.

At a government meeting on February 14, Nazarbayev set out a detailed response to the devaluation. This will include ensuring stability of prices for food and other basic items, and raising civil servants salaries, pensions payments, student grants and other payments.

"It is necessary to take measures for the social support of the population," Nazarbayev said according to a statement on the presidential website. "In this regard, I instruct the government from April 1, 2014 to provide a monthly supplement to the basic salary of civil servants employed in government agencies and government enterprises of 10%."

As well as civil servants, Nazarbayev called for salary increases at the major industrial companies that are Kazakhstan's largest employers. Industrial workers (though not office staff) at companies owned by Kazakhstan's sovereign wealth fund Samruk-Kazyna are expected to get a 10% pay rise. The president also suggested metals and mining companies including Kazakhmys, Arcelor Mittal, Kazzinc and ENRC offer workers similar. Several have already said they will comply.

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