Tenge Devaluation: One Month On

On February 4, Kazakhstan’s National Bank dramatically devalued the tenge from a corridor of 117-123 tenge/US dollar to 145-155 tenge/US dollar, citing the decline in oil price (oil comprises 60% of Kazakh exports); currency devaluations in Kazakhstan’s neighbors, particularly Russia; and the fledgling state of the domestic banking sector. The sudden devaluation was unexpected - the general sense in the financial community was that it wouldn’t happen until March or April, and even then it would be an incremental devaluation throughout 2009.

One month later, the tenge is down 22% at just over 150, and the pressure on Kazakhstan’s economy is building. Grigory Marchenko, the central bank governor who oversaw monetary policy in the wake of the 1998 ruble crash and was reappointed in January 2009, is increasingly unpopular. Kazakhstan is heavily reliant on imports, particularly from China and Russia, and prices for these goods (such as appliances and electronics) are noticeably increasing. There is limited confidence in the government’s ability to control prices in the near to medium term, and with the value of tenge wages falling, purchasing power is declining. And exports are not yet showing the expected boost, as commodity prices remain low.

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3. Dollar Stores, Pound Shops…and Tenge Markets
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5. Netherlands Leads FDI in Kazakhstan in 2008