National Bank of Kazakhstan: tenge is undervalued, but interventions may only benefit speculators
ASTANA. July 28 (Interfax) - The National Bank of Kazakhstan does not currently plan to intervene in support of the tenge, as there is no sign of speculative activity in the foreign exchange market, National Bank Chairman Timur Suleimenov said.
Suleimenov shared his comments on the significant weakening of the Kazakh currency on his personal social media page.
At present, the exchange rate is under pressure because "the volume of fiscal injections into the economy is growing, and the money supply has increased 18% over the year," while "GDP and goods production are not keeping pace with the growth of monetary aggregates," which leads to increased imports, Suleimenov said. Kazakhstan moved to an inflation targeting regime and a freely floating exchange rate in 2015, he said.
"This year, significant expenditures are planned, including on infrastructure and social projects. As a result, large contracts are being signed and, in order to utilize the funds, imports of equipment, machinery, and components are being made. This generates increased demand for foreign currency, putting pressure on the tenge exchange rate," he said.
In addition to budget spending and rising imports, other factors affecting the tenge include seasonal dividend payments and demand from tourism, he said.
Fundamental factors currently indicate that the tenge is undervalued, he said. However, no speculative activity has been observed, which prevents the National Bank from conducting interventions.
"Some say we need to intervene and stabilize the exchange rate. There is truth in that if the rate is volatile and unstable due to speculative factors. But if the rate moves up or down due to market or fundamental forces, interventions won't help, and may even be harmful. It's important to understand that unjustified interventions can benefit speculators rather than the economy as a whole. We must manage national reserves wisely," he said.
The National Bank is closely monitoring the situation and is ready to respond quickly in case of sharp volatility and speculative operations, he said.
"As a result of pragmatic government policy, we have accumulated $52.2 billion in international reserves, which will allow us to smooth out speculative fluctuations," he said.
Prime Minister Olzhas Bektenov said at a government meeting on July 15 that the 2026 budget includes an exchange rate of 540 tenge per dollar at an oil price of $60, and that "there are no prerequisites for a sharp weakening of the tenge." At that time, the official tenge-dollar rate was 524.24 tenge per $1. However, by July 17, the tenge had reached a historic low, weakening to 532.74 tenge per $1, and then continued to set new "anti-records". On July 24, the tenge dropped to the 540 tenge/$1 level, reaching the rate projected in the 2026 budget. As of 10:10 MSK on Monday, the tenge was trading at 545 tenge/$1 on the Kazakhstan Stock Exchange.
