ASTANA – National Bank Chairman Kairat Kelimbetov announced widening the tenge’s trading band against the U.S. dollar at a Central Communications Service briefing July 15. The lower limit of the band was kept at 170 and the National Bank raised the tenge’s upper trading limit to 198 per one U.S. dollar.
“Exchange policy won’t be changed in the second half-year period. The National Bank decided to widen the tenge’s trading band for the U.S. dollar from the current 185 +3/-15 tenge to 185 +13/-15 tenge, continuing the policy of flexible and smooth rate control to achieve inflationary targeting on a mid-term horizon, taking into account the fact that the exchange rate almost achieved the maximum of the exchange band,” Kelimbetov said at the briefing.
Kelimbetov noted that this decision gives the National Bank flexibility over the next 12 months and the ability to pursue a well-reasoned and consistent policy for flexible and smooth control of the exchange band. The policy enabled the National Bank to withstand all tests of 2014 and stresses coming from foreign markets. The National Bank also believes that it will be able to meet additional challenges over the next year.
The policy also sufficiently decreases the risk of accumulation of depreciatory expectations in the economy, blocks pressure on the tenge exchange rate and avoids severe corrections, which happened in 2009 and 2014, finance officials believe. The National Bank will not switch the tenge to float freely until 2017 and continues to participate in the domestic currency market to provide financial stability of the exchange rate, reported the National Bank press service.
“Taking into account that the exchange rate is 187 tenge to one U.S. dollar today and in the case of maximal loosening up to 198 tenge to 1 U.S. dollar at the rate of one tenge per month, the exchange rate will be loosened to the amount of 5.9 percent per year. Such process will make deposits in tenge, which offer 10.5 percent interest, more profitable than deposits in foreign currency, which offer only 3 percent interest,” said Kazakhstan economist and Director of Macroeconomic Research Centre Olzhas Khudaibergenov, as reported by Tengrinews.
Khudaibergenov is optimistic about the National Bank plans and believes that if the National Bank is able to hit the target, it will reestablish credibility and continue the policy in the future, saying, “In general, the plan is a ‘happy medium’ for the Kazakh economy in present conditions.”