Baku, Azerbaijan, Sept.5
By Nargiz Sadikhova – Trend:
The price of oil is among the reasons for the recent drastic drop of Kazakhstan's national currency tenge, Bruce Pannier, expert on Central Asia, told Trend.
According to Pannier, Kazakhstan brings in a lot of revenue from sales of oil; however, the recent price has been below $60 per barrel, which is not bad but not where oil exporters, such as Kazakhstan, would like to see it.
"That said, the Kazakh tenge has not dropped in value recently as much as the Uzbek som or Tajik somoni. The tenge has dropped a little more than five percent this year, while just in recent weeks, the Uzbek som has lost some 12 percent of its value and Tajik somoni a bit more than that," he added.
Talking about the effects of the currency drop to Kazakhstan's economy, Pannier noted that as long as oil does not fall below $40-$45 per barrel, Kazakhstan’s economy should be able to avoid serious economic problems.
"Clearly, Kazakhstan is hoping the price of oil will rise significantly, though that does not seem likely at the moment," he added.
Pannier also highlighted that Kazakhstan’s President Kasym-Zhomart Tokayev has promised to increase wages and benefits for teachers, medical workers and others.
"People will expect the new president will fulfill these promises, and that will cost money from the budget. Tokayev has also just spent tens of millions of dollars to write-off some of the debts of some three million people in Kazakhstan," he said.
Pannier further stated that the government of Kazakhstan does have significant financial reserves it can draw on to resolve the issue with tenge drop.
"Also, oil production is increasing, particularly at the offshore Caspian field Kashagan, so revenue from oil sales should continue to flow into state coffers," he reasoned.
In conclusion Pannier said that Kazakhstan just went through an economic decline in 2016, so the government has recent experience in dealing with economic problems and taking measures to alleviate such difficulties.
Follow the author on twitter: @nargiz_sadikh