Kazakhstan Sees No Need for Devaluation as Oil to Ruble Sink

Kazakhstan has no plans to devalue its currency even as the price of its main export, crude oil, plummets, according to central bank Chairman Kairat Kelimbetov.

The 25 percent slide in the price of crude since June, coupled by a weakening of the Russian ruble, the currency of the Asian nation’s second-biggest trading partner, are not “critical” for the tenge, Kelimbetov told reporters in Astana today. The tenge, closely controlled by the central bank, has been in a tight band around 185 per dollar since a 19 percent devaluation on Feb. 10.

“The corridor has enough margin of safety for us to stay in,” he said. “We believe that the February exchange-rate correction took into account all the changes which we’re observing now.”

The Kazakh economy expanded 3.9 percent in the second quarter from a year earlier, within 0.1 percentage point of the slowest pace since 2010. Oil increased 0.5 percent to $85.83 per barrel at 1:39 p.m. in London, after dropping to a four-year low last week.

Russia has spent more than $13 billion of its foreign-currency reserves to slow the ruble’s decline this month as U.S. and European Union sanctions over Ukraine exacerbated a dollar shortage and falling oil prices dimmed the outlook for the world’s biggest energy exporter. The tenge is trading at 4.4212 per ruble, the strongest level since the February devaluation and a 19 percent appreciation from June.

‘Breathing Space’

“We believe the central bank is likely to want to see what happens to the Russian ruble and the Brent oil price over a few more months before making any significant decision on the tenge,” Dominic Lewenz, co-head of research at Almaty-based Visor Capital, said by phone today. “The Kazakh government has comfortable reserves to give it sufficient breathing space.”

Kazakh central bank devalued tenge in February, saying it will trade in a range around 185 per dollar, compared with previous target of around 150 tenge. The devaluation was triggered by the ruble’s weakening, policy makers said.

While the “ruble is more under the influence of geopolitical tension,” Kazakhstan is “confident” in its own economic path and less affected by external factors, Kelimbetov said. The tenge may trade between 3.5 and 4.5 per ruble, he said. The current tenge rate against the dollar implies the currency trading at about 4.5 per ruble, he said.

Russian Trade

“It may be said with confidence that there will be no devaluation through the end of this year,” Olzhas Khudaibergenov, an adviser to Kelimbetov, said last week. The change in the tenge-ruble exchange rate won’t hurt the Kazakh economy, as potential imports from Russia are restricted by price growth there, he said.

Kazakhstan traded $12 billion worth of goods and services with Russia in the first eight months of 2014, the most following Italy, whose Eni SpA is involved in oil projects in the Asian country, according to the state statistics agency. Kazakhstan’s foreign currency and gold reserves rose 13 percent this year to $27.96 billion on Sept. 30, central bank data show.

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