Экономические науки /15 Государственное регулирование экономики

D.T. Jarikbaeva, associate professor, PhD doctor

S.S. Masakova, associate professor, candidate of economic sciences

Narxoz University, Almaty, Kazakhstan

FORMATION OF AN EFFECTIVE MECHANISM OF MONETARY REGULATION IN KAZAKHSTAN: A RETROSPECTIVE ANALYSIS

Economic regulation as an instrument of the state's economic policy has received its formation and development in connection with the emergence of such a phenomenon as the economic crisis. In turn, monetary regulation as one of the types of economic regulation was a response to the strengthening of economic interconnections of national markets, through the development of the institutions of the central financial regulator, affecting not only money and money circulation, but also the financial market as a whole. We are talking about the authorities - the central banks of states, various ministries and departments that have in their arsenal special tools and tools that have relevant characteristics.

In Kazakhstan, which survived the transit phase of economic development, the so-called monetary authorities have increased the world experience in regulating the use of these funds in the conditions of reform, when tasks such as ensuring the stability of the national currency, the effective functioning of the credit and banking system, and, in general, Development of the system of settlements and payments. The implementation of these tasks and the achievement of the goals of economic development through monetary regulation is due to the effectiveness of the methodology for the use of basic tools and the development of specific instructions for the application of this methodology. Together, these methods and methods, as well as instructional materials under various factors and conditions, represent a monetary regulation mechanism that determines the rules and criteria for the activity of monetary authorities depending on the selected goals of economic policy. At the same time, it is obvious that flexibility is an important characteristic of the monetary regulatory mechanism, ensuring that it is the main factor for the development and stable functioning of money circulation, the banking system and, in general, economic activity. In addition, flexibility contributes to the effectiveness of various instruments in the coordination dimension, as well as the achievement of the objectives of commodity-money balance and economic stabilization.

In this connection, it should be noted that, both in general and in methods, all instruments of economic regulation can be divided into measures of direct and indirect impact, and methods of monetary regulation are also subdivided, and depending on the economic situation, the relevant element of the mechanism is put into effect. At the same time, the effectiveness of the mechanism is based on the use of money supply as payment and settlement means and maintenance of money demand.

In Kazakhstan these tasks were solved in stages and during this process the mechanism as well as its interconnection with the fiscal mechanism, including within the framework of improving the country's legislation, was improved.

Within the framework of this article, three stages of improving the mechanism of monetary regulation are singled out:

1) the actual formation (1991-1999), which took place in the conditions of transition to market relations, namely the processes of privatization, liberalization and the emergence of market competition.

2) Operation (2000-2007) in relatively favorable conditions, when there were positive trends in the world economy and world commodity markets, as well as stabilization of the economic situation in the country, as a result of reforms, both in the real sector and in the financial sector of the state.

3) Measures to improve the effectiveness of the monetary mechanism (2008-2016), due to the crisis that affected virtually all areas of the national economy, due to global financial crises.

After gaining independence in 1991, Kazakhstan faced the task of changing the functioning of the economy, in connection with the transition from a planned system to market principles: privatization, liberalization of pricing, and the creation of a competitive environment were required.

The collapse of the USSR, the disruption of the economic ties that existed before, led to a deep crisis in the first half of the 1990s in virtually all spheres of the country's economy. In early 1992, measures were taken to move to market pricing, conducted in the absence of a competitive environment, price liberalization in 1992 led to hyperinflation, a deterioration in the financial condition of enterprises, a reduction in production, a drop in real incomes and stagnation in the entire economy. The annual economic recession in 1991-1995 averaged 9.3%. Almost the payment turnover between the enterprises was destroyed, the amounts of non-payments reached significant volumes. The task of providing the necessary funds for the economy was solved by the National Bank by providing loans to enterprises, banks and the Government to finance the budget deficit, which affected the preservation of high inflation rates. To overcome the crisis, it was required to conduct a tight monetary policy, which was possible only after the introduction of the national currency. In April 1993, the Law of the Republic of Kazakhstan "On the National Bank of the Republic of Kazakhstan" was adopted, according to which the main objective was to ensure internal and external stability of the national currency of the country. In November 1993, the national currency, the tenge, was introduced, which allowed for an independent monetary policy.

When implementing monetary policy, the National Bank began using classical instruments: lending to banks, setting an official refinancing rate and minimum reserve requirements, conducting operations in the foreign exchange market.

The measures taken by the National Bank helped to reduce inflation from 60.3% in 1995 to 1.9% in 1998. In 1996-1999, the average annual production growth was 0.75%. The National Bank promoted the development of the infrastructure of the monetary and financial markets. The system of electronic over-the-counter market of government securities began to operate, allowing real-time sales transactions.

In 1996, the National Bank started short-term repo operations against security of government securities of the Ministry of Finance of the Republic of Kazakhstan, which allowed it to effectively regulate banking liquidity.

In 1998-1999 as a result of the unfavorable situation in the world prices for oil and non-ferrous metals, as well as significant devaluation of the national currencies of the countries trading partners of Kazakhstan, the tenge significantly strengthened in real terms. This reduced the competitiveness of Kazakh goods and had a negative impact on the pace of economic growth.

To prevent negative consequences on the economy of the country, since April 5, 1999, Kazakhstan has switched to the regime of a freely floating exchange rate of the national currency. As a result, the supply of foreign currency in the domestic foreign exchange market increased, which contributed to the stabilization of the foreign exchange market and the financial sector. Inflation in 1999 was 17.8%. In the conditions of stabilization of the situation in the economy, the monetary policy was somewhat relaxed. The refinancing rate in 1999 was phased out from 22% to 18%. The banks' mandatory reserve requirements remained unchanged at 10% of the total deposit liabilities of the bank, except for the period from April 5 to 18, 1999, when the level of minimum reserve requirements was temporarily reduced to 5%.

The macroeconomic environment in Kazakhstan in the period from 2000 to 2006 developed under the influence of favorable internal and external factors. Positive trends in the world financial and commodity markets, as well as the consistent implementation of socio-economic reforms had an impact on the stabilization of the macroeconomic situation in the country. In 2000-2006, inflation was maintained at 6.4% -8.4%, while the average annual real GDP growth was 10.3%.

The growth of the Kazakh economy was greatly facilitated by the investment activity of domestic and foreign capital. There was a favorable pricing environment for domestic exports (oil, gold, zinc, copper, lead and grain) against the backdrop of domestic macroeconomic stability. As part of the easing of monetary policy in the period 2000-2003, the refinancing rate was phased out from 18% to 7%, the overnight rate from 27% to 8%, the repo rate from 23% to 19% . In 2000, the norm of mandatory reserves of banks was gradually reduced from 10% to 6%. The easing of monetary policy led to an increase in lending to the economy by banks and an increase in the supply of money. The annual growth in the volume of bank loans to the economy for 2000-2003 averaged 66.8%, the money supply - 37.5%. At the same time, inflation fell from 9.8% to 6.8%.

Since 2004, the National Bank has begun to define the basic guidelines of monetary policy for three years ahead with an annual refinement of parameters. Achieving macroeconomic stability made it possible to carry out forecasts and develop strategic directions for a longer period, taking into account the situation in the economy and financial markets.

The period from 2004 to 2006 was characterized by high growth rates of the economy. The volume of bank loans from 2000 to 2006 grew 17 times. At the same time, the growth in lending, based on significant external borrowing by banks, has also caused Kazakhstan's vulnerability to foreign economic conditions.

Lending to the economy was disproportionate to the structure of the economy, which led to excessive lending to certain sectors of the economy and the emergence of "bubbles". Against the backdrop of the limited choice of financial instruments for investing free cash funds, the subjects of the economy were keenly interested in their profitable investment. The placement of free cash resources in real estate has become especially attractive. As a result, mortgage lending and equity construction increased significantly, which triggered a rise in property prices.

The high inflow of foreign capital, the excess liquidity on the domestic market, the growth of the state budget expenditures contributed to the increase in inflationary pressures in the economy of Kazakhstan since 2005. In 2006, for the first time since 2001, inflation exceeded the level of 8%.

The intensification of inflationary processes in the economy determined the adoption of measures to tighten monetary and credit policy, that is, an increase in the rates for monetary operations and the withdrawal of excess liquidity.

When carrying out the foreign exchange policy, the floating exchange rate regime of the tenge was maintained, which presupposed its formation depending on demand and supply in the domestic foreign exchange market. Significant inflow of foreign currency due to the growth of prices for major export goods, as well as an increase in external borrowing of banks, contributed to the strengthening of the tenge since 2002 (Figure 1).

Figure 3 - Dynamics of inflation and the exchange rate in 2000-2006 years

The tendency to strengthen the tenge has led to an increase in the volume of foreign exchange interventions by the National Bank. Despite the fact that the National Bank sterilized the purchase of foreign currency, operations in the foreign exchange market contributed to the growth of liquidity in the market. This reduced the effectiveness of measures to regulate inflation.

In order to limit excessive credit activity of banks due to significant foreign borrowings, in July 2006, changes were made to the mechanism of minimum reserve requirements. To curb inflation, the National Bank also took measures to strengthen the regulatory impact of official rates. In 2000-2006, Kazakhstani banks attracted significant borrowings from foreign markets. This contributed to the economic growth of the country, but at the same time increased the vulnerability of the financial sector to external shocks. In addition, this led to a gradual acceleration of inflationary processes. Monetary policy in this period was multidirectional: if in 2000-2003 the National Bank eased monetary policy to support the economy, then in 2004-2006 the National Bank tightened monetary policy in order to overcome inflationary pressures in the economy.

The functioning of the financial system of Kazakhstan in 2008 - 2011 was influenced by the development of crisis phenomena in the world economy. In the general economic aspect, it should be noted that the current conjuncture of prices for the main exports of Kazakhstan under the influence of the manifestations of the crisis consequences of 2008 made the monetary policy less effective.

Kazakhstan today is going through not the best of times, and regarding the policy pursued by the government to regulate the business cycle, too, everything is not clear. Over the past ten years, there have been many changes: the first tenge devaluation in 2008, the aggressive intervention in the banking sector in 2009, the inflation surge in 2010 and 2014, the restructuring of the institutional system of the financial sector in 2011, the "financial" initiatives for IPOs, the second devaluation In 2013, the third devaluation in 2015, the use of methods of inflation targeting, etc. It should be noted that the repeated devaluation of the tenge in Kazakhstan was partly due to the reduction of tenge liquidity in the economy and the slowdown in business activity due to the dollarization of deposits and assets, although the Government has taken and is taking measures to dedollarize the economy. In particular, for currency (dollar) loans and deposits the most unprofitable rates. At the same time, due to mass conversion of deposits from foreign currency in tenge, excessive tenge liquidity accumulated in banks and from the second quarter of 2016 the money market began to function in the conditions of structural surplus of tenge liquidity. Therefore, in order to limit inflationary processes, the National Bank carried out operations to seize liquidity [1].

As we see, all these methods of regulation were designed to stabilize the national economy, to protect it from more severe shocks. At the same time, the free floating of the tenge, which has manifested itself especially in recent times, and measures to reduce inflationary pressures have had little effect on the performance of the national economy (Figure 2).

The National Bank of the Republic of Kazakhstan, on its application, seeks to reduce its participation in the foreign exchange market in order to increase the flexibility of the tenge. This means that with a drastic change in the economic situation, a sharp and significant fall in world prices for energy resources and their retention at this level for a long time, as well as devaluation in the countries that are the main trading partners of the Republic of Kazakhstan, a sharp change in the tenge's exchange rate is possible.

Regardless of the scenario of economic development, monetary policy measures are aimed at keeping the level of annual inflation in the range of 6-8%. The increase in excess money supply, which stimulates inflationary pressures, is mitigated by the growth of sterilization operations of the National Bank.

However, the tightening of monetary policy as a whole was one of the factors of the positive growth in GDP in 2016. In the short term, the regulator managed to rectify the situation somewhat (Figure 2).

Figure 2 - Dynamics of GDP and inflation in the Republic of Kazakhstan, 2011-2016.

Naturally, all these measures reflect the volatility of the real economy. The republic was faced with a lack of clear coordination between the real economy and monetary policy. As a result, the adjustment of monetary policy did not proceed smoothly, without jumps, without the devaluation of the confiscatory nature and extreme rates, namely as described above. The need for "surgical intervention" arose because of the delay in the necessary actions at the level of macroeconomics and guarantees that the process of depreciating the tenge will not continue, at least until the balance in macroeconomics is reached.

References:

1. Sembieva L.M., Alina G.B., Kulyibekova A.M. Perspektivyi i protivorechiya novoy denezhno¬-kreditnoy politiki Kazahstana// Vestnik KazNU, 2016. # 3. S.64-70.

2. Denezhno-kreditnaya politika Respubliki Kazahstan do 2020 goda [Elektronnyiy resurs]. URL: http://www.nationalbank.kz (Data obrascheniya: 14.04.2017).