Government, National Bank adopted joint statement on transition to new economic policy

ASTANA. KAZINFORM During the telephone conference held today in the Ukimet Uyi, the Government and the National Bank of Kazakhstan have adopted a joint statement on transition to a new economic policy: reforms in real economy and a new monetary policy regime.

Kazinform offers the text of the statement.

Joint Statement of the Government and the National Bank on transition to new economic policy: reforms in real economy and new monetary policy regime With the consideration of the enhancing negative factors in global economy, the Government and the National Bank of Kazakhstan are jointly developing a package of structural reforms to ensure sustainable long-term growth in economy and employment sectors. In pursuance of the President's instructions, the National Bank has set to the implementation of the measures on transition to inflation targeting in a short-term outlook. On July 15, 2015 the National Bank decided to enlarge the currency corridor to ensure more flexible and smoother formation of the tenge exchange rate. However, the situation in the global economy keeps on worsening: world prices for basic export products of Kazakhstan - oil and metals - are falling, which, in turn, negatively impacts the GDP growth paces and raises the vulnerability degree of the domestic economy. The reduction in export revenues negatively influences on the country's fiscal revenues and balance of payment. In this regards Kazakhstan's economic policy will be aimed, first of all, at preservation of the socio-economic stability in order to prevent production decline, investment and credit activity, unemployment rise and population's living standards falling. Amid fundamental negative trends in global economy, Kazakhstan's new economic policy requires a new monetary policy to ensure the balance between the economic growth and stability of prices. In this regards, the Government and the National Bank of Kazakhstan took a decision to set to the implementation of a new economic policy since August 20. This policy will be based on inflation targeting and transition to free floating of the exchange rate," the Prime Minister concluded. The exchange rate of the tenge will depend on the market demand and supply with the consideration of fundamental internal and external macro-economic factors. This means that the exchange rate may either loosen or strengthen which will depend again on the situation in global economy and domestic currency market. The National Bank will not interfere into the formation of the market level of the tenge's exchange rate but it will preserve the right to partake in the domestic foreign exchange market and carry out currency trading in case of threat to the country's financial system. The formation of the exchange rate based on market demand and supply without the government's interference will provide necessary prerequisites for the economic recovery, increasing credit and investment activity, creation of jobs and 3-4% reduction of inflation in a short-term outlook. The implementation of the new monetary policy based on inflation targeting will help solve strategic issues of the economic policy - achievement of a long-term sustainable growth of the domestic economy, low inflation rate, employment growth and improvement of the population living standards. The Government and the National Bank will launch measures on support of socially disadvantaged groups of population and prevention of unreasonable rise in prices, in particular for the socially important products and services.