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10 I Companies & Markets bne February 2018
Kazakhs lose faith in national currency
Kanat Shaku in Almaty
Kazakhs have grown accustomed to their national currency crashing abruptly to the detriment of the general population. The Central Asian country
has experienced no less than six such “devaluations” or devalvatsiyas – a word that has come to signify the rapid and sudden weakening of the tenge rather than a general term for loss of value over time – since gaining independence in 1991.
It comes as no surprise then that even after the loosening of currency controls in August 2015, unofficially labelled the “sixth devaluation” by the Central Asian country’s media, some Kazakh citizens have grown paranoid about the possibility of another tenge collapse. This has created a vicious circle, with Kazakhs periodically rushing to exchange tenge for foreign currency, which in turn weakens the local currency.
Despite the current tenge free-float, Kazakhs have developed an adversarial view towards such devaluations, as tenge crashes during the previous stricter currency regime were generally enacted without warning. Typically these resulted in temporary chaos in the retail sector, with shoppers flocking to supermarkets and white goods stores to buy up bargains before retailers shut their doors to raise prices of imported goods. Meanwhile, citizens felt they had been tricked by the authorities as the value of their savings slumped overnight in dollar terms.
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Trust issues
The currency has lost over 40% of its value since the last devaluation, but has stabilised since then. Kazakhs, however, are still wary of keeping their savings in the national currency.
This attitude towards the currency rate has prompted Kazakhs to attempt to outsmart or out-gamble the authorities, who are seen as malevolent. Such public trust issues dictate that, if the authorities are calling for de-dollarisation, they are trying to
“Kazakh citizens have grown paranoid about the possibility of another tenge collapse”
trick citizens by getting them to shift most of their savings into tenge then massively depreciating the currency against the greenback when least expected.
The National Bank of Kazakhstan (NBK) has gradually cut its policy interest rate by a cumulative 1.75 percentage points throughout 2017 to the current level of 10.25%, but deposit rates for individuals at banks mostly stayed at around 13%- 14% throughout most of the year. The high deposit rates