Kazakh currency devaluation right step towards overcoming world financial crisis

ALMATY. February 11. KAZINFORM /Aigul Turysbekova/ The decision made by the RK Government to pursue a devaluationary policy as a supporting measure for overcoming the world financial crisis was the right one. This was stated today by Director of the Economic Institute of the Kazakh Ministry of Education and Science Orazaly Sabden.

?Significant pressure was exerted by the devaluated currencies of the neighbouring countries, particularly Russia and China, on the prices of domestic products. Kazakhstan needed to pursue a policy of preserving gold and foreign reserves, improvement of the capital account, strengthening of competitiveness of national goods on international markets and attraction of foreign investments into the country?, - stated O. Sabden However, O. Sabden believes that devaluation of the currency was somewhat delayed, which now might have a negative impact on the social situation in the country. ?Devaluation leads to a rise in prices on imports, which at the moment occupy a significant share of the consumption basket?, he noted. He also added that the effect of lower prices on the goods of domestic producers abroad causes concern, because usually materials and technology procured from abroad are used in the production process of these goods. This of course requires the use of foreign reserves which, on the other side of the scale leads to a rise in prices of domestic goods. O. Sabden also expressed worry regarding the issue of consumers? power, in view of the decline in wages and rising unemployment, which also negatively impacts the development of SMEs. It is well known that the banking system has to fulfill its external debt obligations using foreign currency. In order to compensate for the debt payments the banks will have to raise their interest rates on loans and lower deposit rates. ?Right now the Government needs to conduct an information-disseminating campaign in order to inform its citizens on the necessity of the devaluation, explain the expected consequences and provide guarantees that it will stick to the established agenda. Attention of the local executive authorities should be drawn to the necessity of regulating prices of products of prime necessity?. In conclusion O. Sabden emphasized that in this situation both public and private establishments must apply concerted efforts in order to help the country overcome the global financial crisis.