ALMATY (TCA) — A sharp strengthening of the Kazakh national currency, the tenge, which may occur due to growing supply of US dollars in the domestic currency market and low demand for dollars, would negatively affect Kazakhstan’s balance of payments and economy, the country’s National Bank said on April 11.
In March the National Bank intervened in the domestic currency market by purchasing $1.236 billion. The National Bank’s participation in the currency market was 41.7 percent. “The necessity of such operations was caused by a significant imbalance between the low demand for US dollars and their growing supply,” the Bank said in a press release.
The supply of dollars increased due to increasing attractiveness of the tenge against the background of stabilizing oil prices and strengthening of the Russian ruble.
There is also a growing trend of converting foreign currency into tenge by Kazakh banks. “We are witnessing a change in currency preferences of the population. In February, the sales of dollars by the population exceeded the purchases for the first time over the past 10 years,” the press release said.
The National Bank also said that bank deposits in tenge are growing while foreign-currency deposits decrease after the recommended interest rates for tenge deposits were raised from 10 to 14 percent and those for foreign-currency deposits lowered from 3 to 2 percent.
“Such change in the exchange rate of the tenge will negatively affect the balance of payments and the economy on the whole, worsening the competitive conditions for domestic producers,” the National Bank concluded.
