The exchange rate between the tenge and US dollar changed from 185 to 255 after the policy shift.
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And this is likely just the beginning of broader currency devaluations as emerging-markets economies that have tried to maintain stable exchange rates see pressure on their currencies intensify, currency strategists say.
Oil took a fresh dive down yesterday on news that US crude inventories rose by 2.6 million barrels last week despite falling production.
“The National Bank and the Government of the Republic of Kazakhstan have decided to proceed with the implementation of a new monetary policy based on an inflation-targeting regime from August 20, 2015, to cancel the trading band and to adopt a free-floating exchange rate”, Mr. Massimov said.
Exports of goods and services make up 40% of Kazakhstan’s gross domestic product, and its economy has already suffered from falling commodity prices.
Central Asia’s biggest crude exporter is contending with sliding oil prices and weakening economic growth in China and Russia, its top trading partners.
China also slightly devaluated its RMB earlier, which may also add pressure to Kazakhstan’s trade.
Analysts said some investors had been waiting a long time for the devaluation of the national currency but that it had still sparked turmoil in the retail sector. Kazakhstan has spent billions on various projects and large events designed to both bolster the country’s international image and highlight investment opportunities but planning for EXPO 2017 Astana has been plagued by corruption and while Almaty lost the 2022 Winter Olympic Games to Beijing (which may be a boon, given the history of Olympic games bringing momentary money and leaving decaying empty stadiums), the country has spent plenty building infrastructure for other large sporting events near the old capital.
“For small and medium-sized businesses it has created uncertainty”.
Yielding to the inevitable, Prime Minister Karim Masimov announced on August in a special video message that the government would switch to a free-float currency exchange. “Some car dealers are shutting up shop temporarily”.
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“Everything I do is connected to the national currency: study, travel”, said Zhanar Agatayeva, a 19-year-old student. “I am going to a bazaar right now, and the tenge in my wallet are weighing less and less”, translator Alexei Chernoussov wrote on his Facebook page.
