BAKU, Azerbaijan, Feb. 7
Trend:
The gold and foreign exchange reserves of the National Bank of Kazakhstan (NBK) are sufficient and create a reliable foreign exchange buffer for the domestic economy, Trend reports via the Analytical Credit Rating Agency (ACRA).
According to the agency, the economy of Kazakhstan is commodity and export-oriented, and therefore it’s characterized by increased risks of exchange rate volatility and the need to cover peaks in demand for foreign currency.
Due to this, the level of gold and foreign exchange reserves (GFR) in the country is of particular importance.
Since 2001, the NBK has both injected foreign currency through foreign exchange interventions and provided it.
Nevertheless, as of the end of 2021, the NBK managed to keep the gold reserves at the level of about 18.5 percent of GDP. This result is impressive, and the regulator was able to achieve it despite the huge currency injections in 2014-2015, which in total were comparable with the current level of gold reserves.
At the end of last year, Kazakhstan's gold reserves amounted to $34.4 billion, which exceeds the total net interventions of the NBK made from 2001 through 2021 (in 2021 prices, this amount equaled $31.7 billion).
Most of the net interventions took place in 2014–2015, because since the end of 2014 Russia, a major trading partner of Kazakhstan, has switched to a new currency regime, which led to the weakening of the Russian ruble against the tenge and caused an excessive demand for foreign currency in Kazakhstan.
Accordingly, one of the key risks that, if realized, could deplete the country's gold reserves is the risk of a need for a large-scale provision of foreign currency.
The question of whether a similar risk should be expected is a key one in understanding the extent to which the gold reserves held by the NBK are sufficient. In 2014-2015, the rush demand for foreign currency in Kazakhstan was due to the dynamics of the cross-rates of the ruble and tenge against the US dollar.
At the moment, both Russia and Kazakhstan have gone through a difficult process of transition to a new currency regime, so the risk of similar currency needs, according to ACRA, has sharply decreased.
Thus, the NBRK has reserves covering more than twenty years of net interventions, which forms a significant foreign exchange buffer for the Kazakh economy.