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ASTANA, August 20. /TASS/. Kazakhstan is shifting to a new economic policy, which implies free floating national currency defined by market demand, Prime Minister Karim Masimov said on Thursday.
"Starting from August 20 of the current year, a decision has been made to begin implementing a new economic policy based on inflation targeting, and cancel exchange rate corridor. The tenge’s exchange rate will now depend on the global economic environment," PM said. "The new economic policy amid fundamental negative changes in the global economy requires a new monetary policy to provide a balance between economic growth and stability of prices," he added.
The dollar surged by 29.2% in Kazakhstan on Thursday to 255.8 tenge versus 197.9 tenge the bay before.
The free floating national currency increases the potential of Kazakh enterprises on the market of the Eurasian Economic Union (EAEU), Minister of National Economy Erbolat Dossayev told TASS on Thursday.
"For Kazakhstan’s economy, for Kazakh producers of goods and services the shift to a new exchange rate policy opens up markets. I can say that Russia and China are the main markets where we may be competitive today," the Minister said. "We have the same economic structure as the Russian Federation, both countries are now oriented toward export when the bulk of revenues depend on export of commodities," he said, adding that integration into global economy brings both pluses and minuses to the country, and the key task for the EAEU member-states is "accelerated diversification of economy."
The government of Kazakhstan plans to introduce a number of tax breaks for oil and gas producers in the nearest months. "In September, a decision will be taken on pegging export tariff duty to oil price, and the Government will stop directive regulation," Masimov said.
Experts questioned by TASS believe Kazakhstan’s move to free float the tenge is a mainly domestic factor that will allow the Central Asian country to increase the competitiveness of its economy.
The chief analyst of the VTB24 investment department, Stanislav Kleschev, said Kazakhstan’s decision was predetermined amid the growing flexibility of currency exchange rates of its neighbors Russia and China.
Yaroslav Lisovolik, the chief economist of Deutsche Bank’s Russian branch, said the impact of the Kazakh currency devaluation on Russia won’t be significant.
"It is most likely that Kazakhstan is catching up with Russia and any competitive factors of pressure on the Russian manufacturers will not be serious, and this also comes as the Russian ruble already depreciated significantly last year," he said.
Alexey Devyatov, the chief economist at Uralsib Capital, also believes the consequences for Russia will be minor.
"Kazakhstan is a small country, and despite geographic proximity, it is not among Russia’s major trade partners," the expert said.
Vladimir Tikhomirov, the chief economist at the BCS financial group, shares the opinion. "Kazakhstan is an important partner for Russia, but its share in the overall trade turnover is not big," he said.
According to Gazprombank, the share of Kazakhstan in Russia’s trade turnover does not exceed 3%.
Kazakhstan is a member of the Eurasian Economic Union, a new integration association, which came into force in January 1, 2015 and comprises Russia, Belarus, Armenia and Kyrgyzstan.