How the National Bank of Kazakhstan Mistakes the Wish for the Reality

The Kazakhs’ confidence in the national currency is reviving and the dedollarization process is continuing, Deputy Chairman of the National Bank of Kazakhstan Alpysbay Akhmetov stated on June 12, 2017 when addressing the Finance and Budget Committee of the Parliament.

Here is a quote from the NBK press-release.

“For the period of 2016, the dollarization of the deposits has decreased from the historical maximum of 70% to 55%. The same dynamics is being observed this year as well. For the period from January to April, the national currency deposits have increased by 10.3% and the foreign-currency deposits have decreased by 12.6%. As a result, a second month in a row, the share of tenge deposits exceeds the share of foreign-currency deposits”.

Unfortunately, Mr. Akhmetov was not entirely correct in his assessment. The matter is that the data given has to do with the total number of the deposits in commercial banks (that is the number of the deposits of both physical and legal bodies). And it seems a little farfetched to consider the latter a part of the country’s population.

In actuality, even though people really have increased the share of tenge deposits and decreased that of foreign-currency deposits, it is still too early to speak about the revival of the confidence in the national currency. To support our argument, we will use the NBK’s official data and see how the nature of the Kazakhs’ deposits had changed during the period from the end of December, 2015 to the end of April, 2017.

Based on the data from the table above, we have prepared a second table that shows clearly how the physical parties’ monetary deposits structure has changed in commercial banks.

We believe that the dynamics of the distribution of the monetary deposits between the tenge and foreign currency accounts does not show the revival of the confidence in the national currency. Rather, it tells us that the majority of the depositors are financially competent and, relatively quickly adapting to the new market conditions, they can use the changes in the NBK’s policy to their advantage.

For example, during the period analyzed, the share of the physical parties’ nonfixed deposits nominated in tenge had not dropped below 63%. Therefore, the people understood that, if they would have to spend the money, there was no point to convert their savings into foreign currency. On the other hand, if we take a look at the time deposits, we will see that their share in tenge had been fluctuating within a big range – from 16.3% as of the end of December, 2015 to 40.6% as of the end of April, 2017.

Obviously, the significant increase of the tenge time deposits share was caused by two factors – first, by the stabilization of the national currency exchange rate and its later strengthening and, second, by the substantially higher tenge deposits return rate. However, the fact that, as of the end of April, 2017, the share of the tenge time deposits still amounts to only two fifths of the total shows that the people’s confidence in the national currency hasn’t grown one bit.

What has grown is the financial competence of the depositors, as we have mentioned before. They can now manage their savings more effectively using to their advantage the changes in Akorda’s economic and financial policies. In its turn, this means that, in the coming years, the government will not be able to decrease the foreign-currency deposits share below 50% of the total volume of the population’s time deposits.

They will fail to achieve this goal for the same reason they have not been able to dedollarize the physical parties’ deposits during recent years – the people will not take more risks than necessary even if the return on tenge deposits will be significantly higher. The people have already “graduated” from the school of life where they had to pay for their confidence in the NBK and the national currency with their own savings.


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