Kazakhstan Urges Russia, Belarus to Coordinate Currency Policies

Kazakhstan urged Russia and Belarus to align currency policies between the three members of a customs union and avoid “sharp, unilateral” devaluations.

“If we move toward a joint economic space with Russia and Belarus, we need to form coherent currency policies,” Kazakh central bank Governor Grigori Marchenko told reporters in Almaty today. The central Asian nation was forced to weaken the tenge twice in the past 16 years “not for domestic reasons but as a result of sharp devaluations in neighboring countries.”

The three former Soviet republics entered a customs union in July and plan to form common economic space by next year. The adoption of a joint currency would be the “next logical step” after creating a common market, Igor Shuvalov, a Russian first deputy prime minister, said last year.

Belarus today abolished restrictions on trading the ruble between banks as it seeks to stem the slide in the nation’s foreign-currency reserves. The decision is “equivalent to a devaluation,” Barbara Nestor, an emerging-markets strategist at Commerzbank AG in London, said by e-mail.

The former Soviet republic, which devalued its currency by about a fifth in January 2009, may need to reduce the ruble’s value by as much as 30 percent, Herbert Stepic, chief executive officer of Raiffeisen Bank International AG, said on April 11.

The comments were echoed in an April 15 interview by German Gref, chief executive officer of OAO Sberbank, Russia’s biggest lender, who predicted the “government won’t be able to avoid a devaluation.”

‘Rather Complicated’

The customs union will delay steps to synchronize currency policies until Belarus “resolves” its “rather complicated situation,” Marchenko said.

The three partners have agreed to work toward integrating currency policies in the union, he said. The National Bank of Kazakhstan devalued the tenge by 63 percent in 1999 and 25 percent in 2009, according to Marchenko.

Russia’s central bank drained more than $200 billion, or about a third of its reserves, in the six months through January 2009 as it managed a 35 percent devaluation of the ruble to the dollar. The government defaulted on $40 billion of domestic debt and devalued the ruble in 1998.

Marchenko also urged the customs union to coordinate fiscal programs to avoid the euro region’s mismatch between uniform monetary policies and diverse approaches to spending among governments in the currency bloc.

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