ASTANA – President Nursultan Nazarbayev held a meeting with Kazakhstan’s major exporters and representatives of the National Chamber of Entrepreneurs (NCE) “Atameken” and business circles of the country on Aug. 20.
Addressing the gathering, Nazarbayev drew attention to the difficult state of the global economy.
“The World Bank and the International Monetary Fund have once again lowered their forecasts for global economic growth to 2.8 percent and 3.5 percent, respectively. The decrease of oil prices in the world continues. From its peak of $115 in June 2014, it dropped to $48.50 [for a barrel of Brent crude oil]. Prices for metals have also dropped; since 2011, the price index has fallen by 45.5 percent. This year alone, the price of copper dropped from $6,300 to $5,100 per tonne,” he stressed.
Nazarbayev noted that low prices for oil and metals could remain for at least five years. He also pointed out the sharp drop in demand for Kazakhstan’s export products by the country’s main trade partners, China and Russia. According to the National Bank, Kazakhstan’s exports in the first half of the year decreased by 73 percent.
In Nazarbayev’s words, last year alone the euro was down against the U.S. dollar by 26 percent, the Japanese yen by 22 percent, the Australian dollar by 27 percent, the Canadian dollar by 23 percent, the Norwegian kroner by 35 percent and the Brazilian real by 55 percent.
“The EAEU partners also devalued their currencies. The Russian rouble depreciated by almost two times, the Belarusian [rouble] by 56 percent, the Armenian dram by 17 percent. Thus, the majority of countries, including those in the European Union, countries exporting raw materials as well as trade partners of Kazakhstan devalued their currencies,” he said.
In this situation, according to the President, the country had only three options.
“The first was doing nothing, keeping the course and waiting for improvement. However, the price of such a policy is a reduction of production, job losses and the depletion of gold and foreign exchange reserves. Another option was a gradual weakening of the tenge within the corridor. Again, in a poor and uncertain situation on foreign markets, this option required large expenditures of gold and foreign exchange reserves. Therefore, having considered all available options, the most appropriate was the introduction of a free-floating exchange rate for the tenge and the transition to inflation targeting,” Nazarbayev explained.
He stressed that the government and the National Bank had made this decision at the request of exporters, representatives of the NCE and small and medium-sized enterprises.
However, Nazarbayev noted that the exchange rate alone cannot make the economy competitive.
“This is a temporary support. We also need additional systematic measures to boost economic reforms and comprehensive solutions to support small and medium-sized businesses. Therefore, I instructed the government and the National Bank to develop such packages,” he said.
“We are the only factory producing ammonium nitrate and ammonia,” Takhmina Nagumanova, deputy director of KazAzot, said at the meeting. “During the first five-year period, we successfully modernised our plant and increased capacity by 50 percent. Unfortunately, the current economic situation did not allow us to fully produce and implement our potential. For today, the adjustment of the national currency is correct and the right decision in order to preserve jobs.”
In turn, Yerlan Orynbekov, chairman of the Caustic National Company said, “We are engaged in the production of caustic soda, hydrochloric acid and sodium hypochlorite. Before our factory started to work, these products were exported to Kazakhstan from Russia, China and Uzbekistan. With the launch of our project, we completely replaced the domestic market with locally made products. I fully support my Kazakh colleagues. I believe that the currency correction is a timely decision. It will give industrial enterprises a chance to participate in a fair competition.”
Nazarbayev also proposed that the government implement social initiatives planned for 2017 in 2016, including introducing a new model of remuneration of civil servants, as well as increasing payments to people with disabilities and scholarships.
He instructed the National Bank to introduce a mechanism for compensating individuals’ urgent deposits in order to reduce losses among the population from the change to the exchange rate.