Kazakhstan’s central bank said Monday that it has spent more than $1 billion in foreign exchange interventions since mid-November in an effort to stabilize the declining currency, which has passed the threshold of 500 tenge to the U.S. dollar and hit record lows. Kazakh officials attribute the drop to the global appreciation of the dollar, a decrease in oil prices, the tumbling Russian ruble and other factors.
The National Bank said it expects to spend another $800 million or $900 million in foreign currency sales in December to cover transfers from the National Fund to the state budget. It also noted that the government on Nov. 19 reinstated a requirement that “quasi-government entities” sell 50% of foreign currency revenue as a measure to balance the FX market.
“On the domestic FX market, there was an increase in demand for foreign currency from economic agents and a limited supply, partly due to the exchange rate surpassing a psychological threshold,” said the bank, referring to the 500 tenge to the dollar barrier.
“Amid the deterioration of several fundamental factors, to prevent destabilizing fluctuations, smooth excessive volatility in the tenge exchange rate, and ensure the supply of foreign currency, the National Bank conducted foreign exchange interventions from November 15 to November 28. The total volume of currency sales for the month amounted to USD 1,047 million,” it said.
The tenge fell to a record low of 520 to the dollar on Monday, according to financial news reports. The Bloomberg news agency said the currency went as low as 530 to the dollar on Monday afternoon, amounting to a loss of more than 13% for the year so far.
A significant factor affecting the tenge is the fall in the value of the ruble, which took another hit last month after new Western sanctions were imposed on Gazprombank, a Russian state-owned bank that handles energy transactions.
Kazakhstan and Russia are major trading partners. On a visit to Kazakhstan last week, Russian President Vladimir Putin highlighted growing trade between the two countries and said: “Payments were and still are a problem, but we now have over 80 percent of payments made in national currencies, which, of course, makes our work in the financial sphere easier.”
Russia accounts for almost 20% of Kazakhstan’s foreign trade, according to Kazakh President Kassym-Jomart Tokayev. He said last week that Kazakhstan remains a partner of Russia during this “difficult” time, possibly a reference to geopolitical tensions and economic challenges related to Russia’s war in Ukraine.
On Monday, Nurlan Baibazarov, Kazakhstan’s deputy prime minister and minister of the national economy, appealed for calm, said finances are stable and that Kazakhstan had weathered similar exchange rate fluctuations at the beginning of the war in early 2022, according to the Orda.kz news site.
