At the government session chaired by Prime Minister Alikhan Smailov, the issue of the impact of the conflict in Ukraine on the country's economy was considered. Chair of the National Bank Galymzhan Pirmatov spoke about the current situation in the financial markets.

According to the Chair of the National Bank, Kazakhstan is a member of the Eurasian Economic Union. The Russian Federation is a key trading partner, accounting for 42% of Kazakhstani imports. In this regard, the aggravation of the geopolitical situation and the imposition of sanctions against Russia are also transferred to the Kazakh economy. As a result of the significant weakening of the Russian ruble, the pressure on the financial market of Kazakhstan is growing.

In order to minimize the negative consequences of external shocks, the National Bank is implementing a package of measures aimed at mitigating the risks of a significant increase in inflation, protecting tenge savings and prudent use of the country's gold and foreign exchange reserves.

“First, on Feb. 24, the National Bank promptly made an extraordinary decision to raise the base rate to 13.5%. This decision is aimed at reducing pressure on the national currency and inflation, as well as the safety of tenge assets,” Pirmatov said.

Second, together with the Government, the implementation of the Joint Action Plan was immediately launched. The Tenge Deposit Protection Program was announced, which provides for the accrual of compensation (premiums) on deposits of individuals in tenge at the expense of the budget.

Third. Following the increase in the base rate, the marginal rates on household deposits in tenge, recommended by the Kazakhstan Deposit Guarantee Fund, have been increased.

Fourth. Considering the risks of financial stability, the National Bank carried out foreign exchange interventions for $176 million last week.

“We promptly disclose information about our interventions. The National Bank monitors developments in real time and assesses the degree of impact of new anti-Russian sanctions on the financial system of Kazakhstan. On Feb. 26 and 27, the United States and European countries announced a new package of unprecedented restrictive measures against the Russian financial sector by disconnecting individual Russian banks from the SWIFT system and freezing the assets of the Central Bank of Russia,” said the head of the National Bank.

In order to minimize the impact of new anti-Russian sanctions on the financial system of Kazakhstan, the National Bank has started implementing the next stage of anti-crisis measures.

First. Yesterday, against the backdrop of high uncertainty in foreign markets, in order to prevent the impact of the increased volatility of the Russian ruble, the National Bank decided to conduct trading in the tenge-US dollar currency pair in the Frankfurt auction mode. At the same time, in order to avoid excessive volatility, the opening of trading in the tenge-dollar pair was postponed until the corresponding opening of full-fledged trading in the Russian Federation and the announcement of measures by the Central Bank of Russia.

As a result of trades, the tenge rate was at the level of 495 tenge 00 tiyn tenge per US dollar. The trading volume amounted to $159.5 million. Taking into account the increased volatility, the National Bank carried out foreign exchange interventions in the amount of $98.1 million, or 61.5% of the trading volume.

“Second. Regarding the blocking of access of certain Russian banks to SWIFT, we note that this will not affect the conduct of payments within Kazakhstan and does not pose a direct threat to the country's payment market. All operations of Kazakhstani banks to conduct client and own payments and money transfers within the country are carried out in a regular mode. To ensure cross-border transactions with clients of Russian banks disconnected from the SWIFT system, alternative mechanisms for mutual settlements have been prepared,” Pirmatov said.

It should be noted that the National Bank is closely monitoring the markets and, in case of further deterioration of the situation, will continue to take effective measures to ensure financial and macroeconomic stability.

The National Bank has all the necessary tools and uses them in a reasonable way. As of Feb. 25, the country's gross international reserves amounted to $87.7 billion (an increase of $346 million since the beginning of the month), incl. assets of the National Fund — $54.0 billion, gold and foreign exchange reserves — $33.7 billion.

“The National Bank will continue to adhere to the inflation targeting regime with a freely floating exchange rate, without interfering with market exchange rate formation and excluding targeting a certain level of exchange rate. At the same time, we will carry out foreign exchange interventions in case of increased risks to financial stability. The set of measures taken is aimed at maintaining the attractiveness of tenge assets, reducing the risks of dollarization and pressure on the exchange rate, as well as mitigating the risks of a significant increase in inflation,” Pirmatov concluded.