. Last Updated: 07/27/2016

New Bank Head Takes Control in Kazakhstan

ALMATY, Kazakhstan -- Kazakhstan's central bank chief Daulet Sembayev resigned Wednesday to make way for his young deputy Uraz Dzhandosov in a move welcomed by bankers as a smooth handover of control at a respected young institution.

At a ceremony, President Nursultan Nazarbayev accepted the resignation of Sembayev and nominated Dzhandosov, 34, a Moscow-trained economist, to take over at the helm of the bank.

Sembayev took over the National Bank in December 1993, just after the ejection of Kazakhstan from the post-Soviet ruble zone forced the hasty launch of the national tenge currency.

He cut runaway inflation from 1,158 percent in 1994 to 60 percent last year and oversaw the tenge's stabilization.

Bankers said they expected more of the same from Dzhandosov -- first deputy chairman since January 1994 and Sembayev's right-hand man before that at the Kazakh foreign investment agency.

"Our view is positive," said Paul Maxwell, managing director of Abn-Amro Bank's branch in Kazakhstan.

"It shows that the government and president are committed to the continuation of the reform process," he said.

One analyst at Citibank rated Dzhandosov as a better banker than Sembayev, who was more respected as an administrator.

"There will be no changes in monetary policy," the analyst said. He did not expect a big market reaction.

On Kazakhstan's interbank currency exchange, the tenge edged down slightly to 64.336 to the dollar from 64.319 Wednesday.

Nazarbayev praised the work of Sembayev and rewarded him by nominating him as senator to the new upper house of parliament.

"With the arrival of Sembayev the international authority of the National Bank of Kazakhstan rose," the Kaztag state news agency quoted Nazarbayev as saying.

Sembayev built a strong team which nurtured a crowded secondary banking sector and promoted the growth of financial markets in the Kazakh capital.

But the handover comes at a crucial time -- just after a rise in inflation has forced a second successive hike in the key refinancing rate to keep real interest rates positive.

"Tight money is a must, irrespective of who is at the helm of the National Bank," Maxwell said. "It is critical that they do maintain the policies of the past 18 months."

The last rate increase came Jan. 5, to 59 percent from 52.5 percent, after monthly inflation rose to 4.4 percent in December from 3.6 percent in November. The 1996 budget foresees inflation of 27 percent to 28 percent -- about 2 percent per month.

Rumors of the impending resignation of Sembayev had been circulating for months, but were resolutely denied by the bank's leadership.

Talk of Sembayev's likely departure was sparked by a clause in the new constitution passed by referendum last August tightening the president's control over the chairman's job.

Bankers said they would have to wait to see if Dzhandosov, a bespectacled academic type, would be able to remain independent under pressure to generate growth this year for the first time since Kazakhstan's independence from the Soviet Union in 1991.