The downward trajectory of Kazakhstan’s national currency since last month has caused economic pain all around, but the free-float engineered by the country’s financial authorities was intended to benefit at least one group: exporters.
Not so, says Moody’s Investors Service.
“Any positive revenue effects for exporters from depreciation will be offset by the revaluation of debt and higher expenses, owing to exporters’ significant share of expenses pegged to foreign currency and cost inflation,” Moody’s vice president Denis Perevezentsev said in a briefing note on September 21.
Importers will take the biggest hit from the devaluation of the tenge, which has lost 50 percent of its value since mid-August, Perevezentsev said.
“Import-oriented businesses, such as food and non-food wholesalers and retailers, will suffer the most and we expect that these companies will find it difficult to quickly pass price increases on to their customers without incurring a possible reduction in demand,” he said.
This echoes what retailers are saying on the ground in Kazakhstan, where they are fretting over the rocketing costs of the goods they import, which they doubt they can pass on to customers.
A rise in inflation as a result of a weaker tenge will also end up “eroding the upside for companies that stand to benefit from a reduction in their cost bases while lower real incomes and higher prices for imported goods will result in reduced demand,” Moody’s said.
In addition, the devaluation will have a “negative impact” on domestically focused companies such as the Kazakhstan Temir Zholy national railway company and KEGOC power grid operator, Moody’s said, owing to “mismatches between their smaller share of foreign currency revenues, and the high share of foreign currency in costs and/or debt structures, which will weaken their ability to service foreign currency debt to varying degrees.”
The tenge briefly reached a low of 300 to the dollar last week but rallied to around 261 by the afternoon of September 22 following a series of National Bank currency interventions. The bank spent $480 million in the last three days of last week to halt the depreciation.
Currency woes are among the broader range of issues cramping Kazakhstan’s dynamism.
Interfax-Kazakhstan news agency on Tuesday cited Moody’s Assistant Vice President Ernest Sergenti as saying the ratings service was revising its economic growth projection in Kazakhstan for this year to 2 percent from its earlier 2.2 percent estimate.
“However, we project a return to growth of about 4 percent as the oil output and prices increase,” Sergenti was quoted as telling reporters in Almaty.
Sergenti said Kazakhstan’s economy could expect to see a return to robust expansion in 2017, Interfax-Kazakhstan reported.