Kazakhstan abandons rouble in favour of national currency: Transition to tenge and tiyn opens way for first IMF deal, writes Hugh Pope in Almaty

Click to follow
A CROWD of accountants collected at the door of the Kazakhstan National Bank was about the most exciting sign left last week of an unusual success story in Central Asia, the move to the new Kazakh national currency, the tenge and the tiyn.

As unflustered as many seem to be in this former Soviet republic, the accountants of the Kazakh capital's state factories and institutions kept good order. One by one, they picked up their consignments of the new money as their check numbers flashed on an electronic sign over the door to the cashiers' office.

'This is pretty much the usual crowd,' said a 25-year-old Kazakh banker waiting to pick up his branch's stack of pretty new notes, printed in Britain and decorated with furry-hatted, wispy-bearded grandfathers of this Asiatic nation. 'Of course we are happy to have our national currency, but we don't know yet if it will be hard or soft. Prices are still rising.'

The question about future inflation was met with a dry laugh by the governor of the National Bank, Galym Baynazarov. The former Soviet bureaucrat's world had turned upside down since the decision to launch a national currency was announced on 3 November and carried out between 15 and 20 November. More than 35,000 points of exchange had to be set in a country bigger than western Europe.

'We've nearly finished work,' said Mr Baynazarov. 'The procedure went without serious drawbacks. Our aim now is to create a basis for hard currency. We want to encourage free investment, the free flow of foreign exchange.'

Kazakhstan's President, Nursultan Nazarbayev, had long fought to keep the rouble, trying to balance a nation in which ethnic Kazakhs and increasingly wary Russians are about equal in number in a population of 17 million. But Kazakh officials say they were finally forced out by unacceptable Russian conditions, including a demand to transfer all gold and currency reserves to Moscow.

International institutions were also pushing for a monetary divorce. Kazakhstan is now doing its best to qualify for a full International Monetary Fund standby agreement, the first in Central Asia. If negotiations on an accompanying macroeconomic stabilisation programme go well, the deal will probably be signed next month. This will bring dollars 400m in international loans to Kazakhstan's dollars 700m worth of existing old and hard currency reserves.

Trying to obey the new rules, the National Bank has started to organise foreign currency auctions. Twelve banks bought dollars 3.3m on 19 November at a rate of four tenge and 60 tiyn to the dollar. Yesterday a similar exercise took place at the same levels.

The national bank is clearly trying to instil some confidence in a market place that has played havoc with people's notion of monetary values. Prices can vary by 10 times at shops and kiosks just a few paces from each other.

The government has not left everything to market forces. But currency desks in hotels are selling the tenge at the official rate of four to the dollar, and ordinary people are ready to offer seven or more. 'How do I know what this will be worth tomorrow?' asked a Russian computer engineer, holding out a fistful of the new notes.

The population is nervous and shop shelves unusually empty. But western diplomats and the many foreign financial advisers in Kazakhstan believe that fiscal restraint will prevent the coupon chaos that has engulfed Ukraine and the monetary turmoil in some of Kazakhstan's neighbouring states in Central Asia.

'We believe creditworthiness will emerge,' said a senior western financial analyst in Almaty. Another pointed out that whatever the short-term confusion, Kazakhstan has more than enough bread to feed itself, more than enough coal to burn in its power stations, and a future gilded with precious metals and as much oil and gas as an Arab Gulf state.