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Kazakhstan and Tajikistan devalue currencies

07 February 2009 10:54 (UTC +04:00)

Baku-APA-Economics. Kazakhstanâ€™s and Tajikistanâ€™s central banks have moved to devalue their national currencies, joining Russia, Ukraine and Belarus in abandoning attempts to prop up exchange rates as currency reserves dwindle and the economy staggers.
Kazakhstan’s central bank widened the trading band for the tenge, allowing the currency to fall by 25 per cent against the dollar up to 150 tenge, in response to weaker oil prices and the impact of the global economic crisis.
In fact, Kazakhstanâ€™s devaluation has been highly anticipated for weeks.
Kazakhstan Stock Exchange (KASE) said the dollar was trading at 149.25 tenge at the last session.
IMF experts said the financial crisis in Kazakhstan was pushed by the banking sectorâ€™s overdependence on foreign borrowings and the sharp drop in oil prices.
Despite large saving from its oil windfall, Kazakhstan seems ill equipped to bolster the fragile banking sector that borrowed heavily from cheaply available credit in the world market. They are now in a scramble to repay debts that have since accumulated and with further capital flight possible given falling oil prices the banks are looking to the government to bail them out.
Profit for all of Kazakhstanâ€™s 37 banks plunged 93 percent to 15.4 billion tenge in 2008 from a year earlier as they boosted reserves to protect against delinquent loans, according to the Agency for Financial Supervision. The lendersâ€™ debt to foreigners was 4.688 trillion tenge as of Jan. 1.
Unlike Kazakhstan, Tajikistan has started to carry out the devaluation in a phased way.
In the country, the national currency, the somoni, weakened against the U.S. dollar, falling 4 percent. One dollar costs some 3.82 somoni now.
This trend was caused by the declining foreign exchange reserves and the shortage of the US dollar in the market.
The currency devaluation was 24% in Russia and 20% in Belarus.