According to Yerbolat Dossayev, Chairman of the National Bank of Kazakhstan, the extended measures for the mandatory sale of a part of export earnings as well as the conversion of the National Fund assets guard tenge from further devaluation.
As he noted, the tenge’s weakening is curbed by oil prices, which were fixed at a level above $40 per barrel. At the end of last week, the price of Brent oil consolidated at a mark of $44.40 per barrel amid news of a decrease in oil reserves and oil cut under the OPEC+ deal.
"Internal support for the national currency was provided by the National Fund assets conversion in order to allocate a guaranteed transfer to the state budget, as well as extended measures for the mandatory sale of a part of foreign currency earnings of quasi-public companies," Dossaev said.
In March, the government of Kazakhstan decided to stabilize the national currency rate by obliging quasi-public companies to sell part of their foreign currency earnings in the domestic market. It was supposed that the measure would last until the end of the state of emergency and affect only the quasi-public sector with state-owned shares more than 50%.
The obliged sales of some earnings in foreign currency began on March 26. Since this measure was implemented, the volume of sales amounted to $890 million in general and $195 million in July.
In order to allocate a guaranteed transfer to the state budget, the assets of the National Fund were converted in the amount of $6.3 billion if counted from the beginning of the year. As of July, the volume of conversion was $1.1 billion. The volume of the budget transfer itself amounted to 3.6 trillion tenge in general, including 455 billion tenge in July.
According to the National Bank, because investors are worried about the second wave of coronavirus, the weakening of developing countries' currencies has continued. During the period from the end of June to August 10, the Turkish lira fell 6.9%, the Indonesian rupee lost 3%, and the Argentine peso 3.3%. In this situation, the Russian ruble declined by 3.6% in part due to a decrease in the sale of foreign currency by the Central Bank of Russia, as well as investors quitting from federal loan bonds (after the key rate was cut), and the conversion of dividends into the currency of Russian companies.
Earlier, the National Bank of Kazakhstan predicted that the vacation season and tax week would not have a significant impact on the tenge exchange rate in August.