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Kazakhstan’s Central Bank Maintains Interest Rate at 15.25% Despite Record Decline of Local Currency

By Sama Marwan,

The Central Bank of Kazakhstan has kept its base interest rate unchanged at 15.25%, despite the Kazakhstani tenge (Kazakhstan’s official currency) hitting a series of historic lows this month.

The decision followed the latest consumer price report, which showed annual inflation rising to 8.6% in December, up from 8.4% in November, marking its highest level since last July. Additionally, the central bank announced it would begin selling dollars in a manner similar to its practice of purchasing gold from local producers.

Timur Suleimenov, Governor of the National Bank of Kazakhstan, stated to reporters in Astana, as reported by Bloomberg, “These measures will create additional supply in the foreign exchange market, which will also help stabilize the local currency market.” He explained that the tenge has been affected by the global strengthening of the US dollar, a nearly doubled domestic demand for foreign currency compared to previous years, and the negative impact of heightened US sanctions against Russia. He noted that the tenge is sensitive to changes in the value of the Russian ruble.

As part of its defense of the tenge, state-owned companies were ordered in November to sell half of their foreign currency revenues to support the local currency. These sales are expected to total approximately $500 million per month, according to a report by Halyk Finance.

In November, policymakers spent over $1 billion to support the tenge. The last time the central bank used dollar reserves to bolster the currency was in March 2022.

On January 15, the Kazakhstani newspaper Capital published remarks from Aliya Moldabekova, Deputy Chair of the National Bank, who partially attributed the tenge’s weakness to a new round of sanctions against Russia, a country Kazakhstan remains heavily dependent on. These sanctions were imposed by the outgoing administration of US President Joe Biden earlier this month.

Moldabekova stated, “So far, the fundamental factors exerting pressure on the currency have not significantly changed, such as the continued strength of the dollar. However, there remains pressure and an increase in demand for dollars, which could be short-term and unrelated to fundamental factors. The main source of tension in the currency market is the additional sanctions announced against Russia at the end of last week, which led to high demand for foreign currency from market participants, including individuals.”

Last week, the Kazakhstani newspaper reported that Kazakhstan’s reserves of gold and foreign currency rose to $44.2 billion in November 2024, marking a 23.1% year-on-year increase. In December, gold accounted for more than half of the country’s total reserves, valued at $23.8 billion.

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