Inflation, currency volatility among top risks to Kazakh economy, says Tokayev

NUR-SULTAN — In his State of the Nation address on Wednesday, President Kassym-Jomart Tokayev discussed the economic consequences for Kazakhstan’s economy of Western sanctions imposed on Russia. Food price spikes and currency volatility are among those challenges, he said.

The President delivering his speech in Parliament. Photo credit: Akorda

“Kazakhstan is facing financial and economic difficulties unprecedented in our modern history due to the worsening geopolitical situation. The harsh confrontation with sanctions is already carrying serious costs not only for individual countries but also for the entire global economy. The situation is changing rapidly, literally every hour. Uncertainty and turmoil in global markets are increasing and chains of production and trade are collapsing,” Tokayev said.

To ensure the country’s food security, he told the government to monitor the quality of the upcoming sowing campaign and ensure that they are ready for it, including fuel, farming equipment, seed stocks and fertilizers.

President Tokayev also mentioned his March 14 decree which restricted the export of cash foreign currency exceeding the equivalent of US$10,000 and gold bullion weighing more than 100 grams.

The country’s financial market and its national currency, the tenge, came under severe strain after the West imposed sanctions on Russia, Kazakhstan’s biggest trading partner. This immediately caused the value of the tenge to plummet and the National Bank had to intervene, injecting US$198.9 million on March 9 alone despite the floating exchange rate that Kazakhstan has adopted since 2015.

“Large institutional players should only buy foreign currencies as part of their contractual obligations, guaranteeing their supply. We must strive to increase the sales of export earnings in foreign currency by enterprises with public participation. I expect the private users of the basement to sell their foreign exchange earnings as well. As part of their contractual obligations, second-tier banks must control and monitor the purchase of foreign currency by their customers,” Tokayev said.

He also assured the public that there was “no reason to panic” because Kazakhstan has the reserves to overcome the crisis on a large scale. Noting the “geopolitical storm”, Tokkayev said now was the time to build unity within the international community.

The President’s State of the Nation Address focused primarily on political reform, including simplification party registration procedures and the transformation of the distribution of power from the “super-presidential system to a presidential system with a strong parliament”.