The International Monetary Fund approved of the steps taken by Kazakhstan to float the foreign exchange rate of the Tenge. The IMF's representative in Kazakhstan, Paul Ross, praised the move at a press conference on 6 April saying it would "restore the competitive position" of Kazakhstan globally and help to promote growth. "I think that there will be a period, I hope a short one, with some volatility, but very soon I expect market participants will regain confidence as they see that the National Bank continues to implement a strict budget policy." However, Mr. Ross expressed some concern about the conversion of bank deposits and the reduction of the central bank's reserve requirements. The latter, in his opinion, will lead to less efficiency and transparency on the foreign currency market. At the same time, he said that the IMF supports the major reforms in the country including privatisation, bank restructuring, and the reforms in the state sector. He added that the IMF is prepared to co-operate with the Kazakhstani government to elaborate a full package of financial and structural measures to support the new Tenge exchange rate policy. (Interfax)

By allowing the Kazakh national currency, the Tenge, to float, Kazakhstan is taking "a step in the right direction," said Kadyr Tanzhu Yurukoglu, the World Bank's representative in Kazakhstan. These steps will improve the competitiveness of the national currency as well as "set up macroeconomic stability." Export companies will be able to resume profitable export operations and local producers will be able to compete with importers. "The base of the Kazakh economy is in very good shape now," and, therefore, the country will not be hit by a crisis. The introduction of the floating Tenge rate "should alter" the loan portfolios of large Kazakhstani banks which will result in banking system stability, he added.

Already this year the World Bank has taken a number of steps "to make the Tenge competitive." In this connection the bank intends to lend Kazakhstan USD 350m. Of this amount, USD 175m will be used to support the budget and USD 100m will be used to reform the social sector.

The World Bank will also lend USD 42.5m of a total of USD 49.53m that Kazakhstan needs to implement a long-term health service restructuring programme. (The Kazakhstani government will provide USD 5.3m, USAID will give USD 1.2m, and the remaining USD 53,000 will be provided by the World Health Organisation.) The loan will be given for 20 years with a 5-year grace period and will be the first phase of three "adaptable loans" amounting to USD 162.5m which the World Bank plans to provide over the next eight years. (Interfax)

The National Bank's expectations with regard to the floating exchange rate have been reached, the NBK's Chairman Kadyrzhan Damitov said at a press conference on Friday, 9 April. According to him, the currency market is showing some signs of self-stabilisation following a short adaptation period. He said that the volume of transactions on the government securities market totalled KZT 729m (USD 6.3m) from 5-8 April. Over the week, the yield on Eurobonds issued by Kazakhstan in 1996 increased from 14.24% to 14.41%, and from 11.79% to 12.44% for the Eurobonds issued in 1997. Damitov said that a real demand for the Tenge occurred on Moscow's currency market where the Tenge was bought at KZT 115/USD 1 and sold at KZT 120/USD 1. (Interfax)

The liberalisation of the Tenge will not cause a systemic crisis in the country's banking sector, financial analysts and spokesmen said to Reuters on Friday. The president of Deutsche Bank Securities (Kazakhstan), Grigory Marchenko, was quoted as saying that "no systemic crisis is threatening banks. The National Bank has promised loans, the payment system is functioning, bank depositors and their deposits are protected." The Kazakhstani Government announced the introduction of a floating exchange rate for the Tenge on 5 April. It also lifted the restrictions on trade with a number of CIS countries and let bank customers convert their Tenge deposits to Dollar deposits at an exchange rate of KZT 88.3/USD 1. Exporters will be obliged to sell 50% of their export revenues beginning 12 April.

Marchenko believes that the floating Tenge will not destroy banking capital. "Capital will, naturally, suffer to some extent, but this will depend on the banks' capitalisation. A 25% change in the Tenge rate will not wipe out bank capital. Most T-bills have been held by pension funds. However, they are protected [by the exchange of their Tenge-denominated securities to hard currency securities]. Also, the National Bank has stated that it will provide technical loans to cover liquidity," said Marchenko. (Reuters)

At the end of March, Kazakhstan had USD 1.7bn in gross gold and foreign currency reserves. According to the head of the National Bank, Kadyrzhan Damitov, who spoke at a press conference on Monday, 5 April, the introduction of a floating exchange rate was chosen by the Kazakhstani government and the National Bank from several proposals for dealing with the Tenge's exchange rate. These proposals included a smooth and gradual devaluation at 10%-20% annually and a sharp one-time devaluation. (Interfax)

The National Bank (NBK) issued a decree on 6 April to introduce special hard currency-denominated notes of the National Bank of Kazakhstan. The new securities aim to protect pension funds in light of the floating Tenge. The issue will actually be effected by exchanging pension funds' portfolios of Tenge-denominated notes to USD 100 notes. The swap will be carried out voluntarily based on applications by pension funds to the NBK at a rate of KZT 88.3 per one Dollar. Only NBK notes that pension funds held in their portfolios as of 3 April will be subject to the swap. (IRBIS)

The speaker of the lower house of the Kazakhstani Parliament, the Majilis, Marat Ospanov, told journalists on 9 April that the review of the 1999 budget is "rather evident" due to the fall in the value of the Tenge. The parliament sequestered the budget only the previous week. That budget posted revenues at KZT 289.9bn and spending at KZT 357bn with a budget gap of KZT 67bn, or 3.7% of the GDP. When the budget was adopted, the exchange rate was KZT 87.5 to the Dollar, but the current rate is KZT 116. (Interfax)