Will “free” tenge hit Kyrgyz som?
Kazakhstan switches to a free floating tenge exchange rate. According to the Prime Minister of Kazakhstan Karim Masimov, the tenge exchange rate will be based on market supply and demand. The local market of cash currency immediately reacted to the news from the stock exchange: the selling rate of the dollar at banks and exchange offices once grew.
Changes in the foreign exchange market of Kyrgyzstan were not long in coming. The fall in the tenge causede appreciation of the US dollar. The leadership of the National Bank of the Kyrgyz Republic yesterday urgently convened a briefing. The Deputy Chairman Nurbek Zhenish hastened to assure that the National Bank of the Kyrgyz Republic will prevent a sharp surge of the course: "If it is necessary - we will enter with the intervention". And he called for people not to succumb to the hype.
How will free floating tenge affect the economy of Kyrgyzstan and each of us? 24.kg news agency asks the respondents.
Kurmanbek Dyikanbaev, the Chairman of the Parliamentary Committee on Budget and Finance:
-Of course, it will affect us. And not for the better. The situation is predictable if there is stability. Such a strong state as Kazakhstan let tenge float freely. Now, the market will dictate. Of course, this could affect the weak economy of Kyrgyzstan. Yesterday the dollar cost 65 soms. When there is no predictability, we need to be ready for anything. Our market is very dependent on its neighbors - China, Russia and Kazakhstan. Surges of tenge and rouble will dramatically affect our country. We can not keep an artificial exchange rate of the som for a long time.
Another question: the budget is kept by PIP (Public Investment Program) and remittances from migrants. Without these two factors, our treasury will have troubles. We have to prepare for difficult times. Tomorrow we will have raised price of fuel, which will lead to a rise in price of food products. If the economy had worked, we could have been more confident.
Aiylchy Sarybaev, the economist:
-The Kazakhs have their own policy, we have our own. I do not see anything special in this regard.
Oleg Pankratov, the Minister of Economy:
-We will provide you with the official position of the Ministry of Economy later. I'm not ready to answer the question. Just I'm on a business trip in Moscow.
Sergey Ponomarev, the President of the Association of Markets, Trade and Services:
-It is right that tenge went to free economic floating. This should have been done ten years ago. And how will this affect? Of course, it is not very positive for us. Sewers, for example, are in a panic now. People think, how to survive, how not to lose jobs. Of course, this is a problem for export. Now, all our products will automatically rise in price.
By the way, situation in the market is already reflected - the currency increased. But then, of course, not without artificial hype. In a panic I always urge people not to try to outwit the exchange offices. It's useless. All the same, they are professionals in this matter. Making money on dramatic surges seems pointless.
Uran Kadyr uulu, the economist:
-Fall in tenge - short-term phenomenon. This is connected with the fall in oil prices on the world market. The price of oil has fallen from $100 to $40 per barrel, then rose to $60, and again fell to $40. This is the price, below which the oil production becomes unprofitable. In the beginning of the year, the Kazakh and Russian governments budgeted price of oil above $80 a barrel. Where to borrow money? The reserve fund runs out. Therefore, they have to devalue its currency.
Fall in rouble didn't affect heavily the Kyrgyz som. But with Kazakhstan we have more turnover, and the tenge influences som higher. The dollar immediately rose to 65 soms. Our currency is pegged to the dollar more - there is no such dependence on oil, both in Russia or Kazakhstan. We have a more diversified economy, several sources of income. There may be short-term pressure, but soon the situation will stabilize.
Bakytbek Choybekov, the Chairman of Alliance Association of Currency Exchange Offices:
-If earlier in Kyrgyzstan the dollar exchange rate has been stable - 61 soms, then for two days it had grown up to 65 soms per $1. And this situation is observed in all the countries of the CIS, as we depend on each other. But there won't be global shocks. We hope, the National Bank will settle the situation. But while it is impossible to predict, and no one financial analyst can predict the situation.
Akylbek Zhaparov, the ex-Minister of Finance:
-Kyrgyz som has long been floating, and mechanisms of market supply and demand value of the national currency deteriorated. But it so happened that we entered the Eurasian Economic Union (EEU) and now we are tightly linked with rouble and tenge. Kazakh tenge just starts to get used to floating exchange rate - as well as the rouble.
Of course, now there is a direct link, and many will largely depend on stability of the economies of Russia and Kazakhstan. Unfortunately, with both countries, despite the fact that we entered the EEU, we are trading in dollars. This is one of the sore points.
It is difficult to predict rising or falling down of the dollar, as trade in Kyrgyzstan falls, there is no strong demand for the currency to trade with China, as before. Many businessmen have invested foreign exchange reserves in cars, but the car market stopped working. The construction of apartments, mortgages gave high demand. But now there is slum everywhere. We have no greater demand for the currency.
There is another problem. In my opinion, in recent years, the National Bank was left alone with the market, and the government did not help it. The National Bank itself can not withstand sudden changes in exchange rates, it can only neutralize them, and stability of the som is ensured by export potential of the country. Unfortunately, except for Kumtor production, we have nothing to export. This is a problem of our economy and helplessness of the government.