Kazakh national bank’s decision on national currency adjustment is positive
Astana, Kazakhstan, Feb. 13
By Daniyar Mukhtarov - Trend:
The Kazakh corporation Kazakhmys considers a decision on the adjustment of the national currency as being a positive move, chairman of board of the corporation Eduard Ogay said at a briefing in Astana on Feb. 12.
"The national bank's decision on the tenge adjustment is positive, but it is difficult to stress the extent," he said. "We can evaluate the results in six months."
"Suppliers of Kazakhmys goods and services are to negotiate a price adjustment," he added.
"We can transfer additional funds to upgrade the production," he added. "If there are savings we will transfer the use of these funds for the development of the Zhezgazgan region."
"The implementation of previous commitments on the investment programme to the amount of $5 billion for seven years will be intensified.
"We are working on the open market with Russian and other foreign producers," he said. "We hope that everything will remain under the same conditions and the cost of services will be recalculated at the new rate. About 50 percent of partners suspended their contracts to adjust to the new prices. A large group is working on it."
The KAZNEX INVEST National Agency for Export and Investment also believes that the tenge devaluation will have a positive impact on the growth of exports for Kazakh goods and improvement of the foreign trade balance of the country.
"First of all, this will give a positive impetus for enterprises which are mainly export oriented with low dependence on imports," he said.
This leads to the growth of competitiveness of Kazakh suppliers into foreign markets thanks to the advantage of a product price, according to KAZNEX INVEST experts.
Additionally, the conditions for a broad attraction of investments are expanding thanks to a decrease in production costs in Kazakhstan.
It should also be emphasised that producers and exporters will have the opportunity to get additional (devaluation) income which they can then spend on production development. All this increases the competitiveness of Kazakhstan in the world and creates conditions for expansion into world markets.
The well timed devaluation is a necessary condition of the market economy. Many developing economies carried out the decrease of the currency exchange rate which made the goods of these countries more attractive. The U.S., China and Russia took such protection measures of their national production.
On the other hand, the decrease in the exchange rate of the national currency compared to foreign currencies will contribute to the increase of competitiveness of national goods on the domestic market. Devaluation increases prices for imported products and make them less competitive compared to local products and therefore limits imports, that's to say, import substitution takes place. To say in other words, devaluation is a protection measure for national industry, especially under integration processes.
Kazakhstan ranks forty-second on the list of world exporters and the area of exports and includes 119 countries, according to JSC. The republic holds a lead position in the world for uranium, ferroalloys, flour, wheat and oil exports. The export of processed goods hit $21.4 billion or 25 percent of the total volume in 2012.
The National Bank of Kazakhstan adopted a decision on Feb.11 to refuse to maintain the exchange rate of the national currency the tenge at the same level and to reduce the volume of currency interventions and interference in the process of the formation of the tenge's exchange rate.
'The national bank expects that the new exchange rate will be at around 185 tenge
per dollar', a statement from the National Bank said.
The official exchange rate on Feb.11 is 155.5 KZT/USD.
Kazakhmys is a large ore mining and metallurgical company and ranks 11th in the world for copper smelting. It produces 90 percent of Kazakhstan's total copper output.
Translated by N.H., L.Z.
Edited by S.M.