Economics / 10. Enterprise economy
C.e.s. Kuur O.V., Nurzhanova
A.S.
Regional state-owned enterprise D.Serikbayev East
Kazakhstan
State
technical university, Kazakhstan
Ensuring the stability of the national currency of Kazakhstan: problems
and prospects
As for periodic
discussion in the media on the possibility of introducing the common currency
within the EAEC, there is no definite answer, and it would be worth referring
to the experience of the EU countries. This experience shows that the process
of transition to a common supranational currency is very long. There has been 9
years between the moment of signing of the Maastricht Treaty on the
establishment of Economic and Monetary Union and the introduction of the common
currency in 1991 and the actual issuance of the euro. After that, it took 3
more years to complete the process by calling off the circulation of national
currencies in countries that adopted the euro.
Clearly, the situation
in the EU is not so clear at the moment, centrifugal tendencies in the
development of the EU periodically replace the centripetal processes of
retracting an increasing number of European countries in the field of euro. At
the same time, outsider countries accustomed to a certain privileged status (in
terms of preferences available to them) are increasingly thinking about the
liberation from the dictates of the major stronger economically countries.
However, there so far has not been any real-world examples of countries leaving
the eurozone.
Currently, all countries belonging to the EAEC wait and see. There is
also some influence of foreign policy unfavorable situation and related
domestic economic difficulties. Indeed, the introduction of the common currency
can be justified only if it will target the countries of EAEC to carry out
financial policy of mutually beneficial cooperation, rather than capitalizing
due to the economic instability of neighboring friendly countries.
Today, the countries of the Eurasian Economic Union should understand
what kind of benefits the EU countries received after introduction of the
common currency along with evaluating the risks this process involves. The
common eurozone has enabled the EU countries to strengthen the economic
consolidation, to reinforce financial discipline, to provide greater
flexibility of financial resources and made it possible to conduct a unified
exchange rate policy regulation, thereby reducing the financial risks. Some
other advantages include the use of more orderly forms of payments in the
eurozone and the presence of anti-corruption mechanism for financial
transactions based on ensuring their transparency.
Only after weighing all the pros and cons of the introduction of the
common currency and taking into account the interests of their peoples,
countries of the EAEC will be able to choose the right direction for its
development within the framework of the economic union and to make the right
decision on the further destiny of their national currencies.
Today, the question being raised is whether the introduction of the
common currency will help to get rid of the dollar dependence.
The attempts to present the situation in such a way that the common
currency will help to get rid of the dollar dependence is rather a desire to
find an external cause of our economic problems. Whereas in fact, the problems
in the economy is the result of lack of effective domestic economic policy, low
susceptibility of the business sector to innovate and still prevailing raw
orientation of economy. Dollarization of the economy of member countries of
EAEC emerged as a response to the instability of the national currency systems.
It should be understood that the introduction of the common currency will
facilitate the release of the Euro-Asian countries from the dollar dependence
only if the vector of development will be shifted towards the industrialization
of economies based on innovative technologies. Only under this condition, the
new currency will be stable resulting in balanced national finance policy and strong financial market
Today, the governments of Kazakhstan and Russia are betting on the
strengthening of the national currency. There has been a clear choice made in
favor of a floating exchange rate. In this case, the state allows the exchange
rate to fluctuate freely under the influence of supply and demand. Advantages
of the exchange rate are that it allows economic agents to focus on market
requirements, makes it possible to carry out monetary policy independent from
other countries. In turn, the negative consequences will be traced in such
issues as the uncertainty of the course, which stops from making the long-term
forecasts, as well as the reduction of imports and exports.
The policy of a fixed exchange rate existed before this period has left
its position in favor of a new monetary policy based on inflation targeting
regime. The new regime implies the elimination of the exchange rate band and
the transition to a freely floating exchange rate for a period of twelve to
thirty-six months. National Bank will no longer interfere in the formation of
the market exchange rate level, at the same time, it will be able to
participate in the regulation of the domestic foreign exchange market (through
foreign exchange intervention) in case of a threat of destabilization of the
financial system. In this case, Kazakhstan relies on the experience of
countries such as Canada and Australia.
The external shocks associated with a significant decrease in oil prices
and a slowdown in economic growth contributed to the transition to the floating
exchange rate. This transition is a very complicated process, requiring
appropriate training and competent approach.
As it turned out, there are some benefits of the new policy although
they are not that significant. The introduction of the floating exchange rate
does not give the state the expected benefits due to the occasional foreign
exchange intervention continued by the National Bank.
In this case, there are some questions arising. Is the change of the
exchange rate, i.e. the transition to a floating exchange rate, not much
different from the company held a few years ago called the devaluation? What is
the threat of foreign exchange intervention periodically conducted by the
National Bank? Who gets the benefits for a given exchange rate?
After the Government of the Republic of Kazakhstan together with the
National Bank announced the need to transition to a new monetary policy, which
involves the abolition of the exchange rate band and the transition to a freely
floating exchange rate, many large companies in various sectors have expressed
confidence that the new monetary policy help enterprises-exporters of oil,
coal, metals and grains to occupy their respective niches. In addition, they
expected increase in the competitiveness of Kazakh products and profit growth
in foreign markets. However,, according to experts, the depreciation of the
currency has not brought significant benefits and has not yet become a very
efficient measure.
It is also worth addressing the question of the expediency of foreign
exchange intervention, as huge funds are allocated to carry it out. The state
gets no benefits of doing so since the total volume of foreign exchange
intervention has exceeded 1 billion 300 million US dollars for the period from
October 6 to the end of 2015. Such rates of interventions had a negative impact
on the economy as a whole and, in particular, to the National Welfare Fund of
the Republic of Kazakhstan, which, if they continue, could be depleted to
critical levels. However, the intervention of the National Bank is still needed
to align exchange rate fluctuations. In turn, they can be both spontaneous,
caused by the global market conditions and deliberately provoked and desirable
for major players seeking to profit from the emerging currency panic and a low
rate of national currency. One can not ignore the fact that some banks are able
to use their reserves playing on exchange rate fluctuations. Thus, they will be
able to get a quick profit resulting in a loosening of the economic situation
in the country.
All the above shows the critical importance of a balanced monetary
policy. By their nature, macroeconomic processes are complex and require
careful study.
Floating rate ensures the independence of domestic monetary policy, but
the risk of violating the independence under the influence of the external
factors still remains that can lead the economy to inflationary consequences.
However, the number of countries using this mode has been steadily increasing
every year. For example, Russia had completed the transition to inflation
targeting in 2015. One of the stages of transition can be considered
abandonment of control over exchange rates which took place in November last
year. Thus, for Kazakhstan transition to inflation targeting is also an element
of coordination of monetary policies in the framework of the Eurasian Economic
Union.
All these points once again show how
important it is that the National Bank continued to demonstrate the society and
market players their ability to control the situation by effectively using
market-based instruments in the situation of heightened economic turbulence.