Kazakh currency drops record 23% on rate shift
Print Edition
ENERGY-RICH Kazakhstan’s currency fell a record 23 percent yesterday after authorities shifted to a free-floating exchange rate as the Central Asian nation battles to cope with lower oil prices.
The Kazakh tenge’s plunge to over 257 to the US dollar sent jitters across the country as flustered shopkeepers and foreign exchange workers struggled to cope with the sudden change.
The tenge later rallied to 252.6 to the dollar at close of trading on the Kazakhstan Stock Exchange.
Prime Minister Karim Massimov announced at a government meeting yesterday that authorities were abandoning a currency band for a free-floating exchange rate amid bleak price forecasts for crude oil, Kazakhstan’s linchpin export.
“The National Bank and the government have decided to implement a new monetary policy from August 20, 2015, based on an inflation-targeting regime,” Massimov said.
Widely viewed as a success story in post-Soviet Central Asia, Kazakhstan has been under intense economic strain ever since the national bank ordered a shock 20 percent devaluation against the greenback last year.
The ex-Soviet nation’s 75-year-old President Nursultan Nazarbayev yesterday attributed the policy switch to demand from exporters and called it a “necessary change” at a meeting with entrepreneurs in the capital Astana.
“A crisis always brings about adjustments,” said Nazarbayev, who has called for future economic planning to assume oil prices of US$30-40 per barrel.
Global oil prices hit a new six-and-a-half-year low yesterday, nearing the key US$40 a barrel level as a surprise rise in US stocks fueled supply glut fears.
In addition to slumping prices for crude, which accounts for half of Kazakhstan’s export, the economy has been hit by falling demand in two key foreign markets, Russia and China.
China last week devalued its yuan.
The slide of the Russian ruble has also taken its toll on Kazakhstan, resulting in cheaper Russian products flooding the domestic market.
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