Crossroads Asia

Kazakhstan’s Economic Good Times End

“We have been spoiled during all these years… This had to end at some point and now the end has come.”

Casey Michel
Kazakhstan’s Economic Good Times End
Credit: yakub88 /

As Kazakhstan celebrates its fourth annual Day of the First – and only – President, the country’s leader appears far from celebratory. Earlier this week, President Nursultan Nazarbayev announced that Kazakhstan will maintain its floating exchange rate. The move to a floating exchange rate – which came after the government spent nearly $30 billion to support the currency – had already caused Kazakhstan’s currency, the tenge, to plummet some 40 percent in the past four months. But according to the president, “There will be no return to endlessly supporting the tenge using the money from the National Fund.”

Indeed, in October, the tenge was declared the world’s “most volatile” currency by Bloomberg. It recently set a record low, climbing past the 300-per-dollar mark – less than half the value it was in early 2014. Of course, Kazakhstan’s currency drop isn’t anomalous within Eurasia. On the backs of a collapsing ruble and decimated oil prices, Central Asia’s regional currencies have all plummeted in value, with concomitant government responses varying from accelerating devaluation in Uzbekistan to forcing the closure of over 1,000 money exchange points in Tajikistan. None of the regional currencies, however, have been as battered as Kazakhstan’s. (None of this is enough, however, to convince Astana to go along with Moscow’s plans for a unified Eurasian currency.)

Nazarbayev also announced a pair of additional economic moves – along with the 100 steps he already ordered just a few months ago – to stem the economic bloodletting. Firstly, he called on state companies to cut costs, namely through selling off assets. Per Reuters, “Kazakhstan was considering selling some or all of its stakes in 60 companies, including miner Eurasian Resources Group (ERG), flagship carrier Air Astana, and Kazakhtelecom.” Likewise, Nazarbayev called for Kazakhstan’s pension assets to return to private hands, reversing a 2013 decree to see them managed under the central bank.

The post-hoc moves continue Astana’s pattern of reactionary remedies, and will, at best, only slow the continued economic fall-off. But to his credit, Nazarbayev at least remains aware of the dark economic forecast looming. As he said, “We have been spoiled during all these years by the big oil money, by the exorbitant prices for our export goods. We handed out money to everybody, everyone bloated their staff, and everyone was content. This had to end at some point and now the end has come.”