The Eurasian Development Bank (EDB) has projected a strengthening of Kazakhstan’s national currency, the tenge, in 2025. This forecast was presented by Aigul Berdigulova, a senior analyst at the EDB’s Country Analysis Center, during the bank’s macroeconomic outlook for the Eurasian Economic Union (EAEU) member states.
Exchange Rate Outlook
The tenge’s exchange rate has been under significant pressure, depreciating from 495 KZT per U.S. dollar in mid-November to 523.58 KZT by December 5, according to Kazakhstan’s National Bank. Exchange offices have reported rates as high as 525 KZT per dollar. The National Bank attributes this decline to external factors, such as fluctuating global commodity prices – critical to Kazakhstan’s export economy – and the weakening of the Russian ruble, a key trade partner’s currency. Internal factors, including heightened demand for foreign currency, have further contributed to the tenge’s volatility. To stabilize the market, the National Bank intervened with $1.2 million from the National Fund in November.
Despite these challenges, EDB analysts anticipate a rebound in 2024 and beyond. “We believe the current volatility in Kazakhstan’s currency market is temporary,” said Berdigulova. She emphasized that the National Bank and government are employing timely measures, including mandatory sales of 50% of foreign currency earnings by quasi-governmental entities and increased transfers from the National Fund.
The EDB forecasts the average annual exchange rate in Kazakhstan to reach 486 KZT per dollar in 2025, a slight depreciation from the projected 466 KZT per dollar in 2024. By 2026-2027, the tenge is expected to stabilize at around 497 KZT per dollar.
Inflation and Monetary Policy
High inflation remains a concern. The EDB predicts inflation in Kazakhstan will decline to 7.3% by the end of 2025, hindered by rising tariffs for housing and utilities. To manage inflation, the National Bank is likely to maintain a high prime rate, above 15%, through the first quarter of 2025. However, as inflationary pressures ease, the rate may decrease to 11.25% by late 2025.
External Influences and Oil Revenues
Marina Sobolevskaya, head of the EDB’s Country Analysis Center, acknowledged that the Russian ruble’s depreciation would continue to impact the tenge, with the ruble expected to weaken from 92.5 per dollar in 2024 to 104 per dollar in 2025 and 107 per dollar by 2027.
On the other hand, Kazakhstan’s currency could gain support from increased oil production, particularly from expanded operations at the Tengiz oil field. Higher exports and foreign currency inflows could mitigate currency fluctuations in the domestic market.
Short-Term Recovery
The possibility of a short-term recovery for the tenge was also suggested by Murat Temirkhanov, an advisor at Halyk Finance. He attributed recent volatility to a surge in demand for dollars, driven by sanctions-induced ruble depreciation. Temirkhanov argued that the tenge-dollar exchange rate’s sensitivity to the ruble is overstated, given the relatively small share of ruble settlements in Kazakhstan’s foreign trade.
Halyk Finance estimates the tenge’s current exchange rate of 525 KZT per dollar is above its fundamental value, which should be closer to 505 KZT per dollar. However, the firm withheld a long-term forecast, pending developments such as oil price trends and potential policy shifts under incoming U.S. President Donald Trump.
Floating Exchange Rate Policy
National Bank Governor Timur Suleimenov reaffirmed Kazakhstan’s commitment to a floating exchange rate regime during a Senate session. He argued that fixed rates, historically used to stabilize the tenge, exacerbate economic imbalances and necessitate abrupt devaluations.
“A fixed exchange rate in our context leads to inevitable devaluations,” Suleimenov explained. He cited the 2014-2015 period when the government spent 30 billion KZT ($58 million) in reserves to defend the tenge, only to resort to devaluation eventually.
Kazakhstan’s floating rate policy, Suleimenov concluded, is essential for maintaining long-term economic stability.
