Europe South Asia Asia Pacific Americas Middle East Africa BBC Homepage World Service Education

Front Page



UK Politics







Talking Point

In Depth

On Air

Low Graphics

Tuesday, April 6, 1999 Published at 12:07 GMT 13:07 UK

Business: The Economy

Kazakhstan's currency tumbles

People are worried about a Russian-style collapse of the economy

Kazakhstan's central bank chief has urged the country's citizens not to rush out and buy dollars after the tenge currency lost 33% of its value in one day.

The fall followed the government's abrupt announcement late on Sunday that it would no longer intervene to support the tenge and allow it to float freely on foreign exchange markets.

The bank's chairman, Kazdyrzhan Damitov, said the tenge's fall from 88.30 to the dollar on Friday, to 100.02 on Monday and 150.00 on Tuesday was exaggerated by an "unnecessarily nervous mood" among traders.

[ image: Kazakh President Nursultan Nazerbayev has given up the defence of the tenge]
Kazakh President Nursultan Nazerbayev has given up the defence of the tenge
"I would not recommend people today rushing out to exchange kiosks and buying dollars at a rate of more than 138.50 (tenge)", he said.

Russian domino

The rouble's devaluation in neighbouring Russia last year made many Kazakh producers uncompetitive and triggered a flood of imports. After an eight-month rear-guard fight to defend the tenge, the Kazakh government was finally forced to act.

Prices in markets and shops in the commercial capital of Almaty have already begun to move up in reaction to the weakening tenge.

Some shop keepers doubled their prices on Tuesday morning, while others quoted prices only in dollar equivalents.

Dollar shortage

Mr Damitov said a new rule requiring enterprises to surrender half their hard currency export earnings to the official exchange market would take effect on Monday, easing the temporary dollar shortage.

Initial reaction to the radical policy change was mixed. Many people worried about their savings and fear a replay of the Russian economy's collapse last year.

But major companies in the key metal and oil sectors praised the decision, because it allows them to compete better with enterprises in neighbouring countries.

IMF support

Paul Ross, the International Monetary Fund representative in Kazakhstan, said the IMF broadly supported the government's decision to float the currency, which should stimulate economic growth.

But he said the Fund had reservations on a number of points.

These included a decision to lower commercial banks' hard currency requirements to 5% from 10%, an order to sell 50% of export earnings and a pledge to keep down utility prices for the foreseeable future.

Mr Ross also questioned the cost of a scheme to allow savers to exchange their bank deposits at a rate of 88.30 tenge to the dollar on condition they did not withdraw them for nine months.

Mr Damitov defended the decision, saying that the social cost of the move to a free currency regime had not been forgotten.

Too dear to defend

Western economists said the government had had to abandon regular intervention as it was becoming too costly.

The central bank said gold and hard currency reserves had dropped by $164m during the last month, to $1.6bn.

The bank spent hundreds of millions of dollars defending the tenge in the wake of the Russian crisis in mid-1998, and had its war chest bolstered by a $217m IMF loan.

Mr Ross said that a mission was due to visit Kazakhstan at the end of the month to "discuss financial arrangements".

Officials have stressed that Kazakhstan will not default on its debts, which are small compared to those of Russia.

Advanced options | Search tips

Back to top | BBC News Home | BBC Homepage | ©

The Economy Contents

Relevant Stories

08 Sep 98 | The Economy
Rouble row erupts

04 Sep 98 | The Economy
Rouble collapse continues

In this section

Inquiry into energy provider loyalty

Brown considers IMF job

Chinese imports boost US trade gap

No longer Liffe as we know it

The growing threat of internet fraud

House passes US budget

Online share dealing triples

Rate fears as sales soar

Brown's bulging war-chest

Oil reaches nine-year high

UK unemployment falls again

Trade talks deadlocked

US inflation still subdued

Insolvent firms to get breathing space

Bank considered bigger rate rise

UK pay rising 'too fast'

Utilities face tough regulation

CBI's new chief named

US stocks hit highs after rate rise

US Fed raises rates

UK inflation creeps up

Row over the national shopping basket

Military airspace to be cut

TUC warns against following US

World growth accelerates

Union merger put in doubt

Japan's tentative economic recovery

EU fraud costs millions

CBI choice 'could wreck industrial relations'

WTO hails China deal

US business eyes Chinese market

Red tape task force

Websites and widgets

Guru predicts web surge

Malaysia's economy: The Sinatra Principle

Shell secures Iranian oil deal

Irish boom draws the Welsh

China deal to boost economy

US dream scenario continues

Japan's billion dollar spending spree