Kazakhstan allowed a rapid-fire devaluation of the tenge on February 11, causing the currency to lose a fifth of its value.
The National Bank announced the devaluation without notice to forestall panic buying and currency speculation. In a statement the bank said it had decided to stop its costly policy of propping up the tenge and let it slide to a new currency corridor of 185 tenge to the dollar, plus or minus 3 tenge. That is 19 percent lower than the official National Bank rate of 155.5 tenge early on February 11.
The news caused public outrage, particularly since the devaluation comes just a month after National Bank Chairman Kairat Kelimbetov denied – again – that Kazakhstan would be forced to stop pouring reserves into propping up the currency.
Social networks were abuzz with consternation about the devaluation, with users incensed that their tenge-denominated salaries and savings will be worth around a fifth less in dollar terms, and that sharp rises in the prices of imports (on which Kazakhstan is heavily dependent for everything from food to consumer goods) will follow.
“The government of my country just broke my heart,” commented one user, Zauresh Amanzholova.
At a stormy press conference, Kelimbetov fought off resignation calls, defended the devaluation, and said Astana would strive to keep inflation within the now ambitious target of 6-8 percent this year.
The National Bank statement outlined several factors for the devaluation, including “uncertainty” over the exchange rate of the Russian ruble, which has been falling steadily for months. Kazakhstan’s economy is closely tied to Russia’s – the two are founding members of the Customs Union free trade zone – and the tenge is also partly pegged to the ruble.
The National Bank (which last devalued the tenge in February 2009) also blamed international market volatility and currency speculation due to “high devaluation expectations” for the tenge. Indeed, rumors had been circling since last year, with officials up to President Nursultan Nazarbayev denying them.
Banks immediately dropped exchange rates to around 180-190 tenge to the dollar; some were selling at over 200. Some exchange offices in Almaty stopped selling currency as soon as the news broke; others remained open selling at the higher rates. Business was reasonably brisk and there were no signs of currency shortages.
In an indication of how seriously the devaluation will hit businesses selling imports, some shops selling consumer goods closed up in Almaty while others put up prices by 20 percent and then carried on selling. The Sulpak white goods chain posted a notice on its website saying that all advertising printed before February 11 was invalid, while the websites of rivals Planeta Elektroniki and Technodom were unavailable.