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Expert opinions on Kazakh currency devaluation

ASTANA. February 18. KAZINFORM /Muratbek Makulbekov/ Many of Kazakhstans as well as international experts have commented that RK Governments decision to devalue the Tenge, aside from supporting domestic exporters, will have an overall positive impact on the economy. Experts of the international rating agency Standard&Poors believe that devaluationary measures are directed at the preservation of foreign reserves, which in the last few months have experienced some pressures. Slightly weaker currency is advantageous for the export-oriented suppliers whose operational costs are denominated in Tenge, and will also decrease the volume of less vital imports. However, even in these conditions, S&P expects the current account balance to deteriorate from a surplus of 7.1% of GDP to a 2.1% deficit during the course of 2009. Experts assessed the decision that was adopted by the RK Government on February 4th to decrease the refinancing rate and lower the minimal reserve requirements for commercial banks as a serious attempt not to just secure a positive real interest rate and curb inflation, but to also support banks with liquidity problems. Devaluation of the Tenge was expected so nothing surprising really happened commented Alexander Zholud, expert of the International Center of Perspective Research. He noted that a one-time devaluation is more advantageous than the gradual devaluation implemented by Russia, which significantly exhausted the state reserves. Chief of Treasury of BTA-Ukraine bank, Pavel Kozak, also said that devaluation of the tenge was expected and reminds him of the case of Belarus. Experts of a number of large banks such as Societe Generale and UniCredit think that devaluation of the tenge could reach 30%. Chief Economist of Investment company Troika Dialog, Eugene Gavrilenko stated: Kazakhstans Monetary Policy is in tight connection with Russias monetary policy. Tenges exchange rate fluctuations resembled the dynamics of the Russian rouble rate. In the last 1.5 months Russia pursued an active devaluationary policy. Kazakhstan had to do the same, which is what its Government did by devaluing the tenge by 18%. This was done to prevent macroeconomic asymmetries. Lower oil prices have been the main factor, as Kazakhstan experienced an almost four-fold decrease since the peak prices of mid-2008, which put additional pressure on the capital account. Weaker currency should help alleviate these problems. Director of the Institute of Globalization Issues, Mikhail Delyagin, expressed a similar opinion: During the period of September 2008 - January 2009 the Russian rouble has devalued by more than 30%, and after that devaluation continued along the planned gradual path that was announced by the Central Bank of Russia. Kazakhstan is following our example and therefore the devalution of the tenge is completely logical.


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