Tenge devaluation ? support of domestic production

ASTANA. February 5. KAZINFORM /Muratbek Makulbekov/ Yesterday's drop in the tenge is a necessary and strategic measure of the Government and National Bank.

For a long time the National Bank took efforts on ensuring stability of the exchange rate and maintenance of implicit corridor of KZT 117-123 to the dollar. It allows to ensure economic and financial stability in the global crisis. From the fourth quarter of 2008 till nowadays the National Bank alloted USD 6 bln for ensuring stability at the exchange market and support of the exchange rate in the current range. Within the Government's enlarged session on February 2 it was noted that in connection with currency devaluation in states ? trade partners of Kazakhstan, the domestic enterprises suffer from problems concerning production distribution. In connection with the Russian ruble devaluation large enterprises, which supply production to Russia, came out at the short end, because they had higher pricing facilities than competitors ? the Russian enterprises. From the beginning of 2008 till January 2009 devaluation of the national currencies to the US dollar reached enormities in the states-partners. In Russia ? 44 percent, Belarus ? 28 percent, Ukraine ? 53 percent, Britain ? 38 percent, the European zone ? 13 percent, Norway ? 28 percent, Brazil ? 31 percent, Australia ? 27 percent and in Canada ? 26 percent. As a result over 11 months of 2008 strengthening of a real effective exchange rate of the tenge against currencies of the states-partners formed 13 percent, and taking into account preliminary data of January 2009 ? 16 percent. Because of it a logical step of the National Bank in this situation was not to underpin the tenge in the previous implicit corridor ? KZT 120 to the dollar. A level of exchange rate of the national currency amounts to KZT 150 to the US dollar. Experience of Kazakhstan and other countries which faced decrease of competitiveness shows inefficiency of other measures on support of the domestic manufacturers, except the national currency devaluation. The National Bank announced that a level of one-time tenge devaluation will not exceed 23 percent to the current level and it will be lower than a middle level of national devaluation in other countries of the region. On the one side, it will allow to recover competitiveness, on the other hand, it will be used for an additional factor, which restricts further tenge weakening. The National Bank?s management considers, that existence of a deficit of the tenge liquidity in the financial sphere will not allow to create steady demand in a foreign currency. A potential of devaluation expectations will be exhausted in achievement of announced points. The National Bank will restrain efforts of speculative behavior at a currency market and will avoid predictability of range of exchange rates. The National Bank will not allow sudden swings, which exceed rational expectations. Introduction of restrictions of the current regime of the exchange operations is not foreseen. The National Bank takes additional measures for ensuring stability at the financial market. As top priority measures the next actions will be executed: refinancing rate will decreased to 9.5 percent from February 5, 2009; minimum reserve requirements to second-tier banks will be decreased from 2 to 1.5 percent on internal liabilities and from 3 to 2.5 percent on other liabilities; smooth-running operation of the payment system will be ensured. The National Bank will continue allotment of a necessary short-term liquidity to banks on security of confirmed instruments; bureaus of exchange will be ensured by sufficient volume of foreign currency in cash. Currency adjustment will lead to improvement of competitive conditions for the domestic goods and financial conditions of management of enterprises. As a result of taken measures improvement of the payment balance and maintenance of gold and foreign exchange reserves are expected.