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Probability of Tenge devaluation high as never before - economist
Almaty, December 19 2008
Kazakhstan is facing a high probability of national currency devaluation as never before, said Oraz Zhandosov.
"Today the probability (of tenge devaluation - Interfax-Kazakhstan) is the highest since 1999," Zhandosov said in an interview with the Respublika weekly published on Friday.
According to him, if the prices for raw materials continue falling "devaluation may turn out to be the only leverage for the government to stabilize the macroeconomic situation in the country."
Zhandosov thinks that the National Bank and the government will have to choose between devaluation and the gold and currency reserves.
"If the currency stability is maintained at the expense of the gold and currency reserves for another few months they will soon reduce to a critical level," he said.
"Neither country, if it is not a Zimbabwe, can afford to run out of the gold and currency reserves. There is a certain limit which depends on the macroeconomic parameters and which cannot be exceeded. I am talking about the gold and currency reserves of the National Bank. There is also the National Fund which is treated differently," the expert added.
When talking about consequences of the devaluation Zhandosov said that in the first place it would be painful from the social point of view.
"The banks and companies that lent and borrowed in foreign currency will have more difficulty in servicing their debts as a result of the devaluation. However, given the mistakes the government has made to mitigate the crisis, the decrease in the available resources and a very complicated situation in the global economy, to support the macroeconomic stability will become top priority," the expert summed up.
As reported, in November 2008 Kazakhstan's gold and currency reserves including the total reserves of the National Bank and the assets accumulated in the National Fund decreased by 3.1% (up 18.8% year to date) to make $45.9 billion.
According to preliminary information, the assets of the National Fund stood at $26.8 billion as at November 30.