By Joanna Lillis and Anna Lelik Authorities in Kazakhstan have burned through $414 million over two days in an effort to halt th...
By Joanna Lillis and Anna Lelik
Authorities
in Kazakhstan have burned through $414 million over two days in an effort to
halt the slide of the country’s currency, the tenge, which broke the psychologically
important barrier of 300 to the dollar on September 16. But the emergency
government intervention may be too late for people like Almaty trader Natalya
Ovchinnikova, who is nervously looking down the barrel of bankruptcy.
“We’re
in shock. We don’t know what to do,” said Ovchinnikova, who sells lingerie
imported from Poland, the Baltic States, and Turkey from a small store in
Almaty’s Nikolskiy Bazaar. “We’re dependent on the euro and the dollar.”
The
surge of the US dollar against currencies of developing economies across the
world has been producing many tales of woe in Central Asia, prompting
governments to either surrender to events, or resort to their characteristic
authoritarian methods to contain alarm.
Kazakhstan’s
National Bank stopped propping up the tenge in August. In the ensuing weeks,
the value of the currency plummeted by 50 percent, and the last few days have
been particularly cruel. On September 16, the tenge closed at 283 to the
greenback on the Kazakhstan Stock Exchange and hit a new low of 300 in currency
exchange shops. A Central Bank purchase of $144 million on September 16 was
followed by a $270 million injection the following day. That action has helped
restore some health to the tenge, but it is unclear if this sudden change of
policy should be read as a renewed government commitment to steady
intervention.
The
tenge price of goods that Ovchinnikova and other traders like her buy for euros
or dollars will now soar by 50 percent. The prospects seem clear. “People won’t
buy it — there’s no trade as it is,” Ovchinnikova told EurasiaNet.org.
A
depreciating local currency will deprive many in Kazakhstan of the luxuries to
which they have become used in recent boom years. “When you calculate your
salary in dollars, it’s taken a major cut,” one professional working in
Almaty’s financial sector told EurasiaNet.org on condition of anonymity.
“That’s demotivating.”
With
a higher cost of living, many will be saving less. And foreign vacations that
many middle-class Kazakhstanis had increasingly taken for granted seem set to
become an unaffordable indulgence.
For
all that, the public in Kazakhstan appears to be taking events in their stride.
Unlike last year, when a currency devaluation prompted savers to besiege the
National Bank and take to the streets of Almaty in frustration, there have been
no notable murmurs of unrest.
The
tremors shaking Kazakhstan are also being felt in neighboring Kyrgyzstan. Over
the past year, Kyrgyzstan’s som has slipped almost 30 percent, and took a
particularly deep dive to around 70 to the dollar this week.
National
Bank officials in Bishkek signaled their intent to hold their fire in late
August. Chairman Tolkunbek Abdygulov said at the time that interventions in the
currency market would not happen unless there were sharp fluctuations. That
policy kicked in on September 14, when the National Bank sold $17.6 million in
its first intervention since July 23.
Not
that it did much good. And matters have not been made easier for some by
Kyrgyzstan’s recent entry into the Moscow-led Eurasian Union trading bloc,
which also includes Kazakhstan, Armenia and Belarus.
“The
dollar rate has increased, as have the custom levies for imports from China
after we joined the Eurasian Economic Union, so the prices on our goods have
increased almost two or three times since the start of August,” said Yulia
Smirnova, 25, who sells bathroom fittings at a store in central Bishkek.
Traders
at Bishkek’s colossal Dordoi market say they are being forced to hike their
prices daily to keep up with the rising dollar rate. Smirnova said the impact
has been particularly strong on middle-class customers.
It
remains to be seen if salaries will adjust in line with external currency
shocks.
Aida
Ryspaeva is one of the small army of the Bishkek street corner sellers of the
immensely popular Shoro brand of traditional Kyrgyz drinks. “I have been
selling drinks for almost eight years already. My monthly salary is 6,000 soms
($87). That hasn’t changed because of the fluctuations,” said Ryspaeva, who
said she uses her income to raise her two children.
Currency
troubles are also rippling into Uzbekistan, where the value of the sum, the
national currency, has dropped by around 40 percent on the black market since
the beginning of the year, and is now pushing 5,000 to the dollar. By contrast,
the official rate has only depreciated by some 8 percent.
“It’s
bad for people who deal in sums, or for people who sell consumer goods for sums
locally, like construction materials and anything else they import for
dollars,” one Tashkent-based businessman working in the telecoms sector told
EurasiaNet.org on condition of anonymity.
People
receiving revenue in dollars, such as real estate agents, car sellers and
anyone receiving hard-currency remittances from labor migrants abroad,
meanwhile, are getting more bang for their buck, he said.
Most
people — even those with access to dollars — just yearn “for the sum to be
stable so they can plan their spending or savings without any hesitation.”
It is
hard to draw much reliable information from Turkmenistan, but there are clues
there that not all is well, even though the exchange rate has nominally stood
fast at 3.5 manats to the dollar.
Since
the start of August, a strict $1,000 limit has been placed on how much foreign
currency people can buy. Buyers of international currencies have to produce
their passport to complete the transaction.
Anybody
with savings substantially above $1,000 may feel nervous, which could, in turn,
fuel a surge in black market activity.
In
Tajikistan, the somoni has fallen by 17 percent against the dollar. The
country’s economically most important import — cash remittances sent home by
migrant laborers from Russia — has fallen by 60 percent in value in dollar
terms, according to Russian Central Bank data.
To
remedy the devaluation, Tajikistan’s National Bank on April 16 ordered the
closure of private money exchange outlets. The operators of exchange bureaus
were also obliged to apply for licenses from lending institutions to resume
work. Officials said this measure would help them keep a closer eye on the
operations of money exchange businesses.
In
practice, there are now three rates at play. The official National Bank rate of
6.4 somonis to the dollar, about 6.55 somonis advertised at street exchanges,
and the actual rate of 6.8 or so charged in transactions. All this is largely
technical anyhow, as buying dollars has become virtually impossible.
Many
Tajik businesses are instead turning to the Chinese yuan. "I buy yuan from
my friends who work in exchange bureaus to buy goods in China. It is easier and
less stressful,” said Manzura Holova, a trader at the Sadbarg shopping center
in Dushanbe.
The
Tajik turn to China was underscored by a 3 billion yuan ($470 million) currency
swap deal in early September that is designed to facilitate trade between the
countries. Tajikistan’s National Bank has said funds from China will be used to
support the somoni, for loans to small and medium businesses and to ward off
balance of payments crises.
Dushanbe-based
economist Muhammad Umarov voiced doubt that the Chinese cash would be enough to
keep somoni healthy. “The People’s Bank of China is providing yuan, not
dollars. This money will go toward supporting the yuan rate against the somoni.
The yuan too has lost 3.5 percent of its value against the dollar. The yuan
rate will now be stable, but we will have to see about other currencies,”
Umarov said.
This article was first published at EurasiaNet.org on September 17, 2015 / Image Courtesy: Reuters
About The Authors:
Joanna Lillis is a freelance
writer who specializes in Central Asia. Anna Lelik is a Bishkek-based reporter.
