[LINK] "Kazakhstan's quiet balancing act"

[rfmcdonald]

At Open Democracy, William Echols looks at how Kazakhstan is trying to stay stable. It has been doing well so far, but can this continue?

With a ‘president for life’, poor human rights record and hydrocarbon-dependent economy, Kazakstan often appears a mirror image of its northern neighbour, Russia.

Scratch beneath the surface, and you find a post-Soviet state, which, though similar in behaviour to its Russian counterpart, is making its own path.

Over the past ten days, the business world has overwhelmingly been focused on Kazakhstan’s record 23 per cent currency plunge, which followed Astana’s decision to float the tenge. The situation recalls the fate of the rouble after the Russian Central Bank allowed it to float in November 2014.

By that time, the Russian currency had already fallen 50 per cent against the dollar. But the once-maligned 45.6 rouble-dollar exchange rate would soon seem a dream. On December 16, 2014, Russia was hit with its own ‘Black Tuesday,’ when the rouble dropped by 20 per cent —hitting almost 80 to the dollar and inciting panic among a populace no stranger to economic collapse.

Perhaps used to the shocks, perhaps fatigued with bad news, the Russian public has been less swift to react as the rouble hit a seven-month-low last Monday, reaching 71 to the dollar. Some analysts believe the Russian currency could hit 85 by year’s end. Having less and expecting less is perhaps the new norm. 



In contrast, the tenge has begun a slow, though turbulent recovery. Kazakhstan has no plans to intervene to prop up the currency should the situation deteriorate. The central bank claims there is no specific devaluation target they are aiming for.

As Bloomberg reports, Kazakhstan’s Prime Minister Karim Massimov claims the free float ‘will create the necessary conditions for a recovery of economic growth, increased lending and investment activity, creation of new jobs and a decrease in the inflation rate to between three per cent and four per cent in the medium term.’ Such high hopes, however, may be wishful thinking.