ALMATY, Jan 27 (Reuters) - Kazakhstan is spending billions of dollars of its reserves to keep devaluation of its currency gradual and reduce inflationary risks of the sort thrown up in Russia by the rouble’s slide, analysts and former central bank officials say.
Kazakhstan, Central Asia’s largest economy, is closely tied to Russia through trade and, like other ex-Soviet states, has been feeling the pain of the crisis which has driven the rouble down 50 percent against the dollar since the start of 2014.
The Kazakh National Bank devalued the tenge currency by 19 percent last February to curb speculative pressure on the forex market, save reserves and boost economic growth by supporting exporters.
But the devaluation shocked the nation of 17 million, and National Bank Governor Kairat Kelimbetov promised then that the tenge would not be sharply devalued for at least three years.
The bank is now spending billions of dollars from its gold and foreign currency reserves, analysts and former central bank officials say, although this is not reflected in official statistics.
They said the central bank is using currency swaps with commercial banks which flatter the currency reserve figures.
The central bank declined to disclose the volume of its interventions on the forex market or the size of its currency swaps. It did not comment on what future trading range it saw for the tenge.
Aivar Baikenov, head of research at Kazakh investment company Asyl Invest, said he estimated the bank had spent more than $10 billion last year to support the tenge rate.
“At the moment, they actively use currency swaps, which are then counted in the gold and hard currency reserves,” he said.
Baikenov estimated last year’s volume of currency swaps at more than $7 billion and said this year it had surged to around $5 billion.
The word “devaluation” is taboo in Kazakhstan and Kelimbetov this month assured President Nursultan Nazarbayev, who has ruled since Soviet days, that the central bank had enough reserves “not to allow sharp currency fluctuations”.
As of Dec. 31, official data showed Kazakhstan’s total international reserves at $101.5 billion, including $73.6 billion in the National Fund replenished by windfall revenues from oil exports.
Tuesday’s official tenge rate was steady at 184.45 to the dollar, within a 170-188 tenge range set by the central bank.
But like Russia, Kazakhstan is dependent on revenues from oil exports for much of its budget revenue and will be forced to trim its budget, which had been based on an average oil price of $80 per barrel.
Brent crude futures held above $48 on Tuesday as a weaker dollar offset the impact of a global supply glut.
“No one wants to discuss in earnest the nation’s falling gold and currency reserves,” Aidan Karibzhanov, a shareholder in investment company Visor Capital, wrote in an Internet post.
Asyl Invest said it expected the central bank to devalue the tenge annually by 6 percent.
“In general, this (devaluation) can be extended for several years to significantly lessen the imbalance seen today in trade with Russia,” said Baikenov.
Economist Olzhas Khudaibergenov, a former adviser to a central bank head, said he believed the National Bank would opt for a smooth devaluation by 1 tenge a month against the dollar.
“The position taken by the central bank is to wait and see — maybe, (oil) prices bounce back, or a deal is reached on eastern Ukraine, and the sanctions are lifted and the rouble rebounds,” said economist Oraz Jandosov, a former central banker.
“The question is: how reasonable is this strategy?” (Additional reporting and writing by Dmitry Solovyov, editing by Elizabeth Piper/Ruth Pitchford)