Kazakhstan halts gold exports as currency weakens

Kazakhstan has banned the export of hard currency worth more than $10,000, as well as gold and silver bullion, as it tries to stabilize a national currency battered by the ripple effect international sanctions against its main trading partner, Russia.

the decree approved by President Kassym-Jomart Tokayev on March 14 effectively cancels an important provision of the Moscow-led Eurasian Economic Union trading bloc, which in principle allows the free movement of capital.

During a briefing on this provision, Finance Minister Yerulan Zhamaubayev Recount reporters that customs officers would be replaced by border officials, who would inspect people crossing state lines to ensure they were complying.

There have been insistent but ill-documented discussions among financial market insiders across Central Asia about vast volumes of hard currency flowing out of the region into Russia and proportionally large amounts of rubles flowing in the opposite direction. This decision by Kazakhstan seems partly intended to prevent the type of currency speculation that these flows seem to involve.

The tenge has lost 20% of its value against the dollar since Russia invaded Ukraine, dropping from 428 around that time to 511 as of March 15. overvoltage of devices. Inflation in February rose to 8.7% year-on-year, easily missing the government’s 4-6% target.

The National Bank has so far spent $815 million of his reserves trying to keep the tenge in balance. Also, at the end of last month, the regulator announcement he went from trading currencies on the open market to a so-called Frankfurt auction methodwhere only limited offers are accepted to avoid excessive volatility.

Foreign exchange trading in the private sector is officially moribund. The dollar is nominally selling at 520 tenge, although this is largely fanciful, as it has become almost impossible to buy dollars or euros. An employee of a currency exchange told Eurasianet that customers had even tried to buy pounds sterling, for which there is usually little demand, but only Russian rubles, Kyrgyz som and Chinese yuan were available. available.

“As soon as a small amount of dollars and euros enters, they are immediately redeemed. It is not known when these currencies will be freely available,” he said.

The black market is still very much alive. Merchants operating online exchange dollars as long as 1,000 tenge for one dollar.

Some, however, urged caution. Vyacheslav Dodonov, chief researcher at the Government Institute for Strategic Studies of Kazakhstan, believes that predictions about the disappearance of the tenge might be premature because, as he argued, the fundamentals of Kazakhstan’s economy still seem solid.

“Due to the increase in energy prices, export volume, volume of foreign exchange inflow into the country, production of the extractive industry, as a result, the size of gross domestic product will increase in general” , Dodonov said. Recount the news site Zakon.kz at the end of February.

However, a lot has happened since this bullish forecast was made, and the seriousness of the international sanctions imposed on Russia, and its potential implications for Moscow’s closest partners, are becoming clearer every day.

Kazakhstan companies are scrambling to design new logistics solutions for import-export companies wishing to avoid becoming collateral victims of the sanctions regime. And this week, the Russian government kept its promise to ban the export of grain and sugar, including to other members of the EAEU – a move that has raised fears of food shortages in the region.

By Eurasianet.org

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Christi C. Elwood