National Bank of Kazakhstan increases base rate

The National Bank of Kazakhstan has decided to increase the base rate from 9.25 percent to 12 percent to maintain the exchange rate of the national currency, Chairman of the Kazakh National Bank Yerbolat Dosaev said at a government meeting, Report informs referring to Kazakh media.

“Amid the increased risks from the external sector, it is necessary to maintain price stability and protect the tenge exchange rate,” said Dosaev. “Therefore, as part of its mandate, the National Bank has decided at an extraordinary meeting to raise the base rate from March 10 to 12 percent with an interest rate corridor of +/- 1.5 percentage points.”

An increase in the base rate will create conditions for maintaining macroeconomic and financial stability, preventing the negative impact of foreign markets on domestic prices and the level of dollarization, he noted.

The National Bank confirmed its adherence to the free-floating tenge exchange rate, Dosaev added.

“Nevertheless, under the changed conditions, currency interventions aren’t ruled out to ensure the stability of the financial system,” the head of the National Bank said.

Dosaev emphasized that the National Bank is closely monitoring the development of the situation in the global economy and international markets and, if necessary, is ready to take additional measures to ensure stability in the Kazakh financial market.

The chairman of the central bank also noted that on behalf of the head of state on March 9, the government and the National Bank of Kazakhstan made a joint appeal on the situation in the global oil market and measures to ensure macroeconomic stability.

On the morning of March 9, the currency exchange points of Almaty and Nur-Sultan began to trade in US dollars at the rate of 394-399 tenge. Economists said that the reason for the jump in the dollar lies with the collapse in oil prices by almost 30 percent - to $30 per barrel.

It happened because, on March 6, the participants of the OPEC+ deal (OPEC countries and Russia, Kazakhstan) failed to agree to reduce oil production volumes. In addition, the turbulence of the global economy suffering from coronavirus affects global capital and commodity markets.

Kazakh President Kassym-Jomart Tokayev held an operational meeting in Akorda (the presidential residence). The head of state instructed the government, the National Bank and other state bodies to fully implement all social commitments.

The size of the base rate means that the National Bank will issue short-term loans to commercial banks and accept their cash for deposits at a 12 percent interest rate.

Prior to this, the base rate remained unchanged at 9.25 percent since September 2019.