Kazakhstan's Path to Currency Stability Amidst External Pressures

External Factors Affecting the Tenge

The tenge's recent fluctuations can be attributed to several key external factors. The global strengthening of the U.S. dollar has had a significant impact, as has the decline in global oil prices. Additionally, the depreciation of the Russian ruble, due to Russia's role as a major trading partner, has directly affected Kazakhstan's currency. These factors have presented challenges but have also spurred the government to take action.

Deputy Prime Minister and Minister of National Economy Nurlan Baibazarov highlighted these issues during the press briefing. Understanding these external influences is crucial in formulating effective strategies to stabilize the tenge.

Government Initiatives for Economic Stability

The government has launched 17 large-scale projects in various sectors such as petrochemicals, engineering, metallurgy, and agriculture. These initiatives aim to stabilize the economy and maintain growth. Public and private investments have exceeded 2 trillion tenge (US$3.8 billion) this year, with a long-term infrastructure plan valued at 40 trillion tenge (US$76 billion) set to run until 2029. This shows the government's commitment to driving economic development.

Baibazarov emphasized the importance of improving business conditions and attracting foreign investment. By creating a favorable environment for businesses, Kazakhstan hopes to boost economic activity and strengthen its currency.

Inflation Control and Price Stability

The government is committed to curbing inflation and stabilizing consumer prices. Over the past year, inflation rates have declined significantly, dropping from 20.3% in 2023 to 8.4% in the first 11 months of 2024. This is a positive sign for the economy and for consumers.

To achieve price stability, the government is taking various measures such as increasing domestic market supplies, regulating tariffs, and holding agricultural fairs. Kazakhstan has also stockpiled over 826,000 tons of essential food items to ensure sufficient reserves for the coming months. The release of vegetables from stabilization stocks by February 2025 will help counter seasonal price hikes.

Strengthening Social Protections

Pensions and social benefits will be indexed to inflation starting January 2025. This will provide much-needed support to the elderly and those in need. Basic pensions and benefits will increase by 6.5%, and solidarity pensions will see an 8.5% hike. The government has allocated over 6 trillion tenge (US$11.4 billion) in the 2025 budget for social benefits, representing a 12.5% increase compared to 2024.

Families with children are a critical focus, with nearly 2 million families covered by state benefits. These benefits will also increase by 6.5% next year. Additionally, targeted social assistance (TSA) programs will continue to support low-income families, with 76,000 families (403,000 people) already receiving TSA as of Nov.1 this year.

Students and academic professionals will also benefit from increased financial support. Scholarships for undergraduate and postgraduate students have increased by 20% and 15%, respectively. Salaries for scientific organization employees were raised by 18% this year and will see another 17% increase in January 2025.