Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Kazakhstan Urges Calm As Currency Plummets

ALMATY, Kazakhstan -- The head of Kazakhstan's Central Bank Tuesday urged people not to rush out and buy U.S. dollars as the tenge currency plunged for the second day running, in reaction to an abrupt move by the government to allow it to float freely.

Kazdyrzhan Damitov said the tenge's fall to 150 to the dollar earlier on the official exchange from 100.02 on Monday was exaggerated by an "unnecessarily nervous mood" among traders.

"I would not recommend people today rushing out to exchange kiosks and buying dollars at a rate of more than 138.5 [tenge]," he said at a news briefing.

The tenge has slid from 88.3 to the dollar Friday, after the government announced it would no longer intervene to support it.

The ruble's effective devaluation in neighboring Russia last year, which made Kazakh producers noncompetitive and triggered a flood of imports, prompted the move, whose announcement late Sunday caught many bankers by surprise.

Prices in markets and shops in the commercial capital of Almaty had already begun to move up in reaction to the weakening tenge. Some kiosks had marked up their prices twofold Tuesday morning. Others quoted prices only in dollar equivalents.

Damitov said a new rule requiring enterprises to surrender half their hard currency export earnings to the exchange would take effect Monday, easing the temporary dollar shortage.

Liquidity was already increasing, he said.

Initial reaction to the bold change in policy was mixed, with people concerned about their savings and worried about a repeat of the Russian economy's collapse last year.

But major companies in the key metal and oil sectors praised the decision, because it would allow them to compete better with enterprises in neighboring states.

Paul Ross, the International Monetary Fund representative in Kazakhstan, said at a news briefing that the IMF broadly supported the government's decision to float the currency, which should stimulate economic growth after it stagnated last year.

But he said the fund had reservations on a number of points.

These included a decision to lower commercial banks' hard-currency requirements to 5 percent from 10 percent, an order to sell 50 percent of export earnings and a pledge to keep down utility prices for the foreseeable future.

Ross also questioned the cost of a scheme to allow savers to exchange their bank deposits at a rate of 88.30 tenge to the dollar on condition they did not withdraw them for nine months.

Western economists said the government had had to abandon regular intervention as it was becoming too costly. The central bank said gross gold and hard currency resources were $1.655 billion at the end of March, down $164 million from February.

The Central Bank of Kyrgyzstan said Tuesday it had intervened to support the som currency in the wake of an effective devaluation in neighboring Kazakhstan.

A spokeswoman for the Kyrgyz bank said $660,000 had been spent in supporting the som. The currency was trading Tuesday for 39 to 40 to the dollar, compared with 24 to 34 som the day before, Interfax reported.