jarle volume vii issue 5(19) fall 2016...

Journal of Advanced Research in Law and Economics

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Quarterly Volume VII Issue 5(19) Fall 2016 ISSN: 2068-696X Journal DOI: https://doi.org/10.14505/jarle

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Contents:

1 The Efficiency of Special Knowledge in Criminal Proceeding Elvira Abdikapbarovna Alimova … 964

6 Strategic Personnel Management within Innovational Development of Companies Elena I. Danilina, Zhanna A. Mingaleva and Yana I. Malikova … 1004

2 Criminal Policy against Economic Offenses in Kazakhstan Botagoz A. Amanzholova, Gulmira S. Bazarova, Aigul M. Kalguzhinova and Zhanna B. Ualieva … 972

7 From Communist Regime to Liberal Democracy: The Evolution of the Legal System in Lithuania Olga Ivanivna Demenko, Jolanta Bieliauskaitė, Vytautas Šlapkauskas and Milda Vainiutė … 1014

3 Covert Surveillance in the Structural Elements of the Criminally-Remedial Averment Bakhytzhan K. Amirkhanov … 982

8 Particularities of Legal Regulation and Harmonization of Proprietary Rights Legislation in the RSA, Brazil and China Mihail Nikolaevich Dudin, Evgenia Evgenevna Frolova, Ksenia Michailovna Belikova and Natalia Vladimirovna Badaeva … 1026

4 Authorization of the Barring Order by the Investigating Judge: Problems of Legislative Regulation Aidar Bakyt … 989

9 The Nature of the Contract of Life Insurance Agency after Enactment of the Act Number 40 of 2014 on Insurance Mokhamad Khoirul Huda, Ninis Nugraheni and Kamarudin Komar … 1037

5 Dialectics and Logics in Forensic Enquiry of Construction Facilities Andrey Yurievich Butyrin and Ekaterina Borisovna Stativa … 995

10 Foreign Relations of Kazakhstan in the Regional and Global Context: Security and Economic Aspects Zarina Kakenova, Houman Sadri, Galina Kakenova, Amirzhan Alpeissov and Gulnara Ibragimova …1042

Fall 2016 Volume VII, Issue 5(19)

Editor in Chief Madalina Constantinescu Association for Sustainable Education Research and Science, Romania, Romania

Co-Editors

Russell Pittman International Technical Assistance Economic Analysis Group Antitrust Division, USA

Eric Langlais EconomiX CNRS and Université Paris Ouest-Nanterre, France

Editorial Advisory Board

Huseyin Arasli Eastern Mediterranean University, North Cyprus

Jean-Paul Gaertner Ecole de Management de Strasbourg, France Shankar Gargh Editor in Chief of Advanced in Management, India Arvi Kuura Pärnu College, University of Tartu, Estonia Piotr Misztal Technical University of Radom, Economic Department, Poland

Peter Sturm Université de Grenoble 1 Joseph Fourier, France

Rajesh K. Pillania Management Developement Institute, India

Rachel Price-Kreitz Ecole de Management de Strasbourg, France

Andy Stefanescu University of Craiova, Romania Laura Ungureanu Association for Sustainable Education Research and Science, Romania, Romania

Hans-Jürgen Weißbach, University of Applied Sciences - Frankfurt am Main, Germany

ASERS Publishing http://www.asers.eu/asers-publishing ISSN 2068-696X Journal DOI: https://doi.org/10.14505/jarle Journal’s Issue DOI: https://doi.org/10.14505/jarle.v7.5(19).00

Volume VII, Issue 5(19), Fall 2016

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11 Public Administration of Social Security in the Republic of Kazakhstan

Alipasha Agahanovich Karayev, Aizhan Mukhtarova, Yerazak Manapovich Tileubergenov, Aliya Kassymbek, and Zhanna Amangeldinovna Khamzina … 1051

18 The Experience of Foreign Countries in the Monetary System Development Yerkenazym D. Orynbassarova and Yerkebulan S. Karibaev … 1118

12

Strategic Priorities and Challenges of Environmental Management in Kazakhstan Zatira Karbetova, Sholpan Karbetova, Karlygash Otyzbayeva, Adaskhan Daribayeva, Zhanar Dulatbekova and Karlygash Tastanbekova … 1058

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The Possible Consequences of Accession of Kazakhstan to the World Trade Organization Assemgul Rakhimbayeva, Diana Madiyarova, Tatiana Blokhina and Beibit Korabayev … 1127

13 Forecasting the Economic Demand for Occupational Education Oleg A. Kosorukov … 1066

20 Difficulties of Differentiating between Intellectual Property Rights and Human Rights on the Basis of the Case-Law Research Report ‘Internet: Case-Law of the European Court of Human Rights’ Marina Alexandrovna Rozhkova … 1136

14 Influence of Fiscal and Monetary Policy of Kazakhstan on Modernization and Economic Growth in the Conditions of Globalization Nurilya Kuchukova, Mereke Turarbekov and Assiya Agumbayeva … 1086

21 Currency Regulation in the Republic of Kazakhstan in the Context of Integration Anelya K. Saulembekova, Akylbek A. Ilyas, Raikhan U. Smagulova and Eric B. Bakhyt … 1142

15 Islamic Banking and Financial System in Kazakhstan Diana V. Kulibayeva and Zhanat B. Kazbekova … 1096

22 Economic and Environmental Approaches to Developing a System of Integrated Water Resources Management in the Kuyalnik Estuary Basin Mykolai G. Serbov … 1153

16 A Review of Problems in Legal Interpreting Olga A. Lysenko and Oleg M. Barbakov … 1103

23 Administrative – Territorial Reform in Ukraine: Implementation Challenges and Control Mechanism Improvement Roman Vladimirovich Shapoval, Elena Viktorovna Vits’ko, Olga Ivanovna Demenko, and Kristina Vladimirovna Solntseva

17 Best Practice Principles for Business Incubators: A Comparison between South Africa and the Netherlands Natanya Meyer, Daniel Francois Meyer and Sebastian Kot … 1110

24 Possible Impacts of Distrainer's Agents Territoriality Luboš Smrčka, Dagmar Čámská and Jan Plaček … 1170



Co-Editors




Huseyin Arasli Eastern Mediterranean University, North Cyprus Jean-Paul Gaertner Ecole de Management de Strasbourg, France Shankar Gargh Editor in Chief of Advanced in Management, India

Arvi Kuura Pärnu College, University of Tartu, Estonia Piotr Misztal Technical University of Radom, Economic Department, Poland








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25 The Procedural Model of Criminal Prosecution in the Modern Criminal Procedure Legislation of the Republic of Kazakhstan Nurbolat Sultanov … 1179

29 Transformation to Ideas of Investments as Economic Category Asiya N. Turekulova, Dametken M. Turekulova, Lyazzat K. Muhambetova, Gulnar K. Baybasheva and Nurzhamal Zh. Kurmankulova … 1218

26 State Property Management in the Republic of Kazakhstan Binur Adamovna Taitorina, Aigerim Zhaksylykovna Zharbolova, Sabyrzhan Malievich Zhapakov, Moldir Sadibekova, Zhanar Toleubekovna Karasheva, Yermek Abiltayevich Buribayev … 1187

30 The Role of Transaction Costs in Risk Management of Investment Projects Natalya V. Usmanova and Nina A. Orlova … 1226

27 Differentiating Role of Agro-Climatic Conditions in the Development of Grain Farming in the Region Lyudmila S. Tarshilova, Aizhan J. Ibyzhanova, Zhanar K. Yerzhanova, Akylbek U. Sultanov and Zinat K. Amangalieva … 1193

31 Turkey’s Environmental Legislation: Formation and Development Characteristics Mustafa Zhanbaz … 1234

28 The Role of Human Capital in Innovative Economic Development Dametken M. Turekulova, Lyazzat K. Mukhambetova, Rimma G. Satkanova, Gulnara T. Lesbayeva, Nazigul N. Zhanakova and Zhanna Sadu … 1207



Co-Editors




Huseyin Arasli Eastern Mediterranean University, North Cyprus Jean-Paul Gaertner Ecole de Management de Strasbourg, France Shankar Gargh Editor in Chief of Advanced in Management, India

Arvi Kuura Pärnu College, University of Tartu, Estonia Piotr Misztal Technical University of Radom, Economic Department, Poland








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Journal of Advanced Research in Law and Economics is designed to provide an outlet for theoretical and empirical research on the interface between economics and law. The Journal explores the various understandings that economic approaches shed on legal institutions.

Journal of Advanced Research in Law and Economics publishes theoretical and empirical peer–reviewed

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Invited manuscripts will be due till October 1st, 2016, and shall go through the usual, albeit somewhat expedited, refereeing process.

Deadline for submission of proposals: 1st October 2016 Expected Publication Date: December 2016 Web: http://www.asers.eu/journals/jarle E–mail: [email protected] Full author’s guidelines are available from: http://www.asers.eu/journals/jarle/instructions-for-authors

Call for Papers

Volume VII, Issue 7(21), Winter 2016



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Currency Regulation in the Republic of Kazakhstan in the Context of Integration

Anelya K. SAULEMBEKOVA

University of National Bussines, Almaty, Republic of Kazakhstan [email protected]

Akylbek A. ILYAS

L.N.Gumilyov Eurasian National University, Almaty, Republic of Kazakhstan [email protected]

Raikhan U. SMAGULOVA


Eric B. BAKHYT


Suggested Citation:

Saulembekova, K. Anelya, Ilyas, A. Akylbek, Smagulova, U. Raikhan, Bakhyt, B. Eric (2016). Currency Regulation in the Republic of Kazakhstan in the Context of Integration, Journal of Advanced Research in Law and Economics, (Volume VII, Fall), 5(19): 1142 – 1152, DOI: 10.14505/jarle.v7.5(19).21. Available from: http://www.asers.eu/journals/jarle/jarle-issues.

Article’s History:

Received July, 2015; Revised July, 2016; Accepted August, 2016. 2016. ASERS Publishing. All rights reserved.

Abstract The purpose of this study is to analyze currency regulation in the Republic of Kazakhstan in the context of its integration into the Eurasian Economic Union.

The article analyzes dynamic changes in foreign exchange rates over the last 6 years. The authors considered exchange arrangements and devaluation stages of the national currency – tenge. The study displayed dynamics of operations in the domestic foreign exchange market. The authors suggested a number of ways to deal with inconsistencies of currency regulation and control, as well as with the monetary policy of member states of the Eurasian Economic Union.

Tenge devaluation rate to the main world currencies became one of the key sensitivity indicators of the Kazakh economy to the global financial fluctuations.

New realities require competent economic policy of the Republic of Kazakhstan based on both the international experience and specific development of Kazakhstan and the entire Central Asia. Keywords: tenge devaluation, optimum currency area, exchange rate, currency integration, Eurasian Economic Union. JEL Classifications: F13, E31, F15.

DOI: https://doi.org/10.14505/jarle.v7.5(19).21


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Introduction Exchange rate stability is the basis for successful economic development. Devaluation of the national Kazakh currency significantly increased in recent years; this had a negative impact on the country’s economic development, investors’ confidence in the national projects and real purchasing power. Permanent and significant changes in tenge exchange rate may lead to major adjustments in the monetary policy forecasts provided by the National Bank of the Republic of Kazakhstan (NBRK), as well as by the entire government keeping in mind the country’s social and economic development (Macerinskiene and Sakhanova 2011).

Throughout its history, the Kazakhstani tenge depreciated by more than 70 times - from 4.7 KZT per US dollar in November 1993 (Frankel 2005) up to 338.7 KZT per US dollar in June 2016. This reduces credibility of the national currency and increases demand for foreign currency and relevant savings. Competent and flexible monetary policy, with due regard to all the tiny nuances and variations becomes increasingly important. In the era of world economic globalization, normalization of national currencies to the world ones significantly increased. Kazakhstan, as a member state of the Eurasian Economic Union (EAEU) needs to create favorable conditions for monetary integration of national currencies of all EAEU member states, along with a gradual decrease of dollar dependence (Matveev 2011).

The second wave of economic crisis, combined with a decrease in the price of fossil hydrocarbons, dictates the need to pursue a clear monetary and fiscal policy as the main source of export revenue in Kazakhstan. The abrupt transition from fixed rates of exchange to a floating rate, abolition of the currency corridor led to a sharp devaluation of tenge in 2015 (Lutsyshyn and Spivak 2014).

It is necessary to review monetary integration vectors of Kazakhstan and to determine optimum currency area for tenge for the future. In order to solve this problem, the authors of this research provided analysis of the Kazakh financial trends (Kennedy 2002). 1. Background research The first conceptual model of monetary integration focuses on the effective introduction of floating exchange rate in the modern world economy, as well as on ways to ensure effective policy aiming at flexible exchange rates (Mundell 1961). This model also considered the relationship between pricing systems, the impact of government policy and market game on the development of monetary relations, which contrasted with classic market manipulations by means of state support (Fleming, 1962).

Development of this issue in subsequent studies led to the concept of optimum currency areas as a tool for full employment of the working population in the region, more effective international trade, average price stability (Mc.Kinnon 1963, Jorion 1990, Adler and Dumas 1984) as well as the criteria for determining any economy in terms of optimum currency areas (Frankel and Rose 1998).

Fixed rate has certain advantages over the floating one in small economies with a high share of the public sector (Aizenman 2016, Patro et al. 2014, Kennedy 2002).

Fixed rate provides the possibility to avoid potential inflation fluctuations, promotes international trade by reducing transaction costs and exchange rate risks, which can be attributed to international investment, prevents speculations on the sale and purchase market (Fleming 1962).

On the other hand, such monetary policy has certain risks: probable loss of monetary independence and automatic adaptation to trade shocks, default probability along with negative economic phenomena (Frankel 2005, Tu and Meredith 2015).

The introduction of flexible currency rate also has certain risks, primarily connected with disturbances to the balance of payments (Mariolis 2013, Frankel 2013). Studies related to equilibrium models of international asset pricing show that in countries with a free-floating exchange rate currency risks are expressed in the regression of the stock returns on the currency returns (Dübel and Walley 2010).

Among the main reasons for devaluation of the national currency of Kazakhstan in 2009-2016, one should note decline in demand and prices for fossil fuels, which will continue in the long term (Iskakov and Ruziyeva 2014). The country's economy is also heavily dependent on the economic development of the two neighboring states - Russia and China, which are experiencing economic crisis as well. Dependence of tenge on the Russian ruble, which currency corridor is wider leads to devaluation of the Kazakhstani currency (Ryazantsev and Korneev 2014). The exchange rate of tenge is tied to the Russian ruble as a cross-rate against the US dollar, but keeping in mind the increased demand for the Russian ruble on the domestic market of Kazakhstan, leads to possible devaluation fluctuations in terms of the Russian ruble (Gissy 2014). Economic relations with China are getting more complicated due to the market saturation in


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China as a major exporter of finished products, a decline in GDP growth of this country; one can mark an equilibrium trend in the trade between Kazakhstan and China.

The use of international practices in the Kazakh economy is possible provided understanding of the national peculiarities of the country's market (Macerinskiene and Sakhanova 2011). Oil and gas sector is the main element of the Kazakh economy, which determined increase in the Kazakh GDP by almost 6 times between 1998 and 2008, to a value of $ 129.8 billion, while the share of the state budget income from trading fossil hydrocarbons increased from 40% to 63% (Begentaev 2009, Simon 2009). On the other hand, agriculture, engineering, construction, light industry are characterized by decline of consumer interest in contrast to imported goods (Zabortseva 2009). Given the accumulation of money capital, the share of imported goods increased significantly for the last 5 years; this trend became more evident with the advent of the global financial crisis and recession in the oil and gas sector (Kennedy 2002).

In the past decade, the National Bank of the Republic Kazakhstan pursued its traditional fixed rate policy in relation to the national currency. However, significant growth of devaluation expectations and the increase in demand for the foreign currency, that became apparent in 2015, caused the accelerated devaluation of the Kazakhstani tenge. In order to improve external resistance of the Kazakh economy, the central bank changed its strategy to a more flexible exchange rate policy, providing minimization of foreign currency interventions and increased exchange rate volatility (Patro et al. 2014).

The currency corridor was canceled in May 2015. National Bank moved to a freely floating currency, and reserved the right to participate in the domestic market through currency interventions in order to maintain stability of the Kazakh financial system.

On 16 September 2015, NBRK currency interventions amounted to $144 million, on 17 September - $ 270.4 million, on 18 September - $ 67.2 million, on 21 September - $213.1, on 30 September - $ 225 million. Following these events, cash infusions exceeded US $ 1 billion (Frankel 2013). All these data suggest that large market participants, especially banks, received significant revenues from currency transactions.

The instrument of this policy was presented by the key financing rate, gradually corrected upwards by the National Bank in order to minimize further speculative attacks (Lutsyshyn and Spivak 2014). Gradually NBRK ‘sharpens’ the skills of conducting monetary policy under the free exchange rate by checking tenge stability against the undesirable internal effects and varying the size of its interventions (Frankel 2005).

The collapse of the Soviet Union caused active integration of post-Soviet countries. In 1993-1994, these countries decided to form the interstate free trade area of 12 countries, adopted a number of documents aimed at the integration interaction among the former Soviet republics. Nevertheless, reintegration of all post-Soviet states into a single economic union contradicted to national trends of the emerging countries, which pursued independent domestic and foreign policy. In this regard, the integration format was modified in favor of an economic union of Russia, Belarus and Kazakhstan, as the countries characterized by close economic, cultural and political ties (Liebman 2009). However, there are problems related to economic cooperation among the participating countries. The share of mutual trade decreased from 16-17% at the turn of the century to 12% in 2016, which was determined mainly by a noticeable increase in energy exports from the EAEC countries in the CIS countries, as well as by a small volume of investment flows within the organization compared to the total investment volume (Likhachev 2010). Integration demands coordination of macroeconomic policies of EAEC member states (Table 1), including exchange rate mechanisms.

Таble 1. Key macroeconomic indicators of the Republic of Kazakhstan, the Russian Federation and the Republic of

Belarus in 2014

Indicators Republic of Kazakhstan Russian Federation Republic of Belarus

GDP, USD 232 2,094 71

Inflation,% 4,8 6,5 16,5

GDP per capita, USD 13,610 14,570 7,840

Population, million people 17,2 143,7 9,5

Foreign debt, % to GDP 64,1 34,7 54,

Unemployment rate, % 0,3 1,2 0,5

Source: Anon (2016)


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Keeping in mind integration into the Eurasian Economic Union studying Kazakhstan’s currency market and its

development trends, gives the possibility to predict future behavior of the national economy in the formation of a single financial space.

The analysis of changes in the exchange rates of Kazakhstani tenge to the euro, US dollar and the Russian ruble as of from 2009 to 2015, import-export dynamics of foreign currency and the volume of financial transactions is of practical value for predicting foreign exchange expectations, implementation of efficient national policies, the use of relevant materials for comparison with indicators of neighboring partner countries. 2. Methods In order to solve the set tasks, the authors of this study analyzed NBRK data for the period 2009-2015. Construction of charts for the analysis was carried out by using the software package ‘Microsoft Excel 2013’.

In the table ‘Analysis of exchange rates of USD, EUR and RUB as of from 2009 to 2015’, the authors used average weighted exchange rate for the period, fixed on the KASE, and calculated according to the arithmetic average formula (Anon 2016):

1 1 2 2.

1 2

......

n nср вз

n

K Q K Q K QKQ Q Q+ + +

=+ + +

(1)

where K1...Kn – n-swap rate; ср.вз - average weighted exchange rate Q1...Qn - n-transaction volume. The average official exchange rate for the mentioned period was calculated with regard to official exchange rates

determined periodically by NBRK, using the formula (2):

1 1 2 2 ... n nср

K N K N K NKm

+ + += (2)

where K1...Kn – exchange rate valid through a certain period; ср – average;

N1...Nn - number of working days, during which the rate was valid; m – general number of working days in the accounting period. The annual average exchange rates were calculated according to the arithmetic mean formula (3):

1 2.

... nср год

K K KKm

+ + += (3)

where K1...Kn - average weighted exchange rate for one month,

m – number of months in a year.

3. Data, Analysis and Results During 2009-2013, the exchange rates of tenge to the major currencies changed insufficiently, within 2% in USD, 6% - in EUR, and 4% in RUB (Table 2).

Таble 2. Analysis of exchange rates of USD, EUR and RUB for the period 2009-2015

Years

Official exchange rates Exchange rates

Average of period At period's end Average of period At period's end

USD exchange rates

2009 147.50 148.36 147.51 148.46

2010 147.35 147.40 147.35 147.50

2011 146.62 148.04 146.64 148.40


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2012 149.11 150.29 149.08 150.74

2013 152.13 153.61 152.15 154.06

Changes,% to the previous period according to the exchange rate at period's end (2013/2012) 2,2

2014 179.19 182.35 179.49 182.35


2015 221.73 339.47 222.51 340.01

Changes,% to the previous period according to the exchange rate at period's end (2015/2014) 86.46

EUR exchange rates

2009 205.68 212.84 206.95 214.13

2010 195.67 195.23 196.26 193.82

2011 204.11 191.36 204.05 191.80

2012 191.67 198.49 191.96 198.58

2013 202.09 211.17 202.31 211.30


2014 238.10 221.97 239.69 223.70


2015 245.80 371.31 245.79 371.10


RUB exchange rates

2009 4.66 4.92 4.63 4.93

2010 4.85 4.84 4.86 4.85

2011 5.00 4.61 5.00 4.61

2012 4.80 4.94 4.80 4.96

2013 4.78 4.69 4.78 4.72

Changes,% to the previous period according to the exchange rate at period's end (2013/2012) -4.8

2014 4.76 3.17 4.77 3.27

Changes,% to the previous period according to the exchange rate at period's end (2014/2013) -30,7

2015 3.61 4.65 3.63 4,64


Source: Anon (2016).

In 2014, Kazakhstan faced up to a significant devaluation of tenge against the US dollar – over 18%, the change

in value of the tenge against the euro remained at the level of 6%; the Russian ruble lost 30% in price against the national currency of Kazakhstan. In 2015, devaluation significantly increased - more than 86% in USD, 66% - in EUR and 42% - in RUB (Figure 1).


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Figure 1. Changes in exchange rates of USD, EUR and RUB as of from 2013 to 2015, % USD exchange rate as of from 1998 to 2014 is presented in Figure 2.


Figure 2. The tenge-dollar rate As shown by Figure 2, a sharp plummeting and fluctuations of the exchange rate was recorded in March 1999,

February 2009, February 2014 and between August 20, 2015 and January 2016 - from 187 to 394 tenge per US dollar. Table 3 presents data on the import and export of foreign currency by regulated banks of the Republic of

Kazakhstan.


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Table 3. Information on the import and export of foreign currency by regulated banks of the Republic of Kazakhstan, million currency units

Years

USD EUR RUB

Import Export Import-export

balance Import Export

Import-export

balance Import Export

Import-export

balance

2009 3,345 45 3 631 33 611 32 870 -838

2010 5,374 88 5,286 136 108 28 25 216 -191

2011 6,325 18 6,308 347 33 314 39 182 -143

2012 6,764 21 6,743 278 12 266 414 157 257

2013 6,199 15 185 457 39 418 1,556 3,268 -1,712

2014 6,758 85 6,673 740 0,8 739 33,385 2,488 30,897

2015 4,031 23 4,008 330 8 322 98,188 5,853 92,294

Source: Kondratov (2015).

Table 3 shows positive dynamics of foreign currency import by regulated banks as of from 2009 to 2014: USD -

from 3,344,951 to 6,757,910, EUR – from 630,723 to 739,731, RUB – from 838,307 to 30, 896,946. In 2015 year USD-EUR import-export sharply decreased, however, RUB import-export rapidly increased.

Import-export balance for the said period is presented in Figure 3. As the figure shows, in 2015 the largest export-import balance of foreign currency accounts for the Russian ruble – 92,294 million units.

Figure 3. Import-export balance of foreign currency in the Republic of Kazakhstan, million units The analysis of transactions in the domestic foreign exchange market showed contiguous data (Table 4).


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Таble 4. Transactions in the domestic foreign exchange market

Years

USD, million currency units EUR million currency units RUB million currency units

KASE traded value

Transaction volume of

resident banks

Net transac-

tions

KASE traded value

Transac-tion

volume of resident

banks

Net tranactions

KASE traded value

Transac-tion

volume of resident

banks

Net transac-

tions

2009 46,596 35,212 8,423 526,935 600,283 1,049,604 1,210 3,008 8,402

2010 60,619 41,465 10,288 192,745 505,706 448,307 5,674 4,343 10,144

2011 70,498 22,003 12,414 299,400 548,443 800,625 5,197 5,094 14,028

2012 55,296 18,324 12,895 12,000 519,312 675,969 8,273 4,020 18,382

2013 57,513 12,435 12,219 12,500 400,231 954,695 4,239 2,439 30,100

2014 89,006 8,120 14,239 82,600 101,347 1,317,888 11,636 7,404 76,057

2015 55,826 4,121 7,690 38,200 39,642 612,551 18,319 12,045 176,428


As the table shows, the volume of transactions in the domestic market grew rapidly, especially transactions in the

Russian rubles. Deposits in foreign currency in 2015 amounted to 2,937,093 million tenge. Significant volatility of the domestic currency implies relevant methods and ways of tackling this problem.

Exchange rate dynamics of the Kazakhstani tenge, Belarusian and Russian rubles to the US dollar as regards the previous month is shown in Figure 4.

Figure 4. Exchange rate dynamics of the Kazakhstani tenge, Belarusian and Russian rubles to the US dollar as regards the previous month

Source: Gissy (2014).

This figure shows dramatic changes that occurred first in Kazakhstan – 18.6%, then – in Belarus – 7.2%.


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4. Discussion Throughout its history, tenge devaluated by more than 80 times starting from 15 November 1993 to 02.01.2016 (1 US dollar was equal to 4.8 tenge in 1993, and in 2016 - already 390 tenge).

The interval between the first and second devaluations was about 7 years, between the second and third ‘wave’ – 5 years, between the third and the fourth - 1 year, and then – less than one year. The first ‘wave’ caused KZT devaluation by more than 60%, the second – by 25%, and the third, the fourth and the fifth - by 20% Based on this trend, it follows that subsequent devaluations will be performed by NBRK more and more deeply; actually, from August 2015 to January 2016 – tenge was devalued by more than 116% (Fleming 1962). Development of the optimal exchange rate regime under convergence of the Eurasian Economic Union came to the fore as the main tool of economic policy.

The need for monetary reform has been growing for a long time. The crisis in emerging markets and the fall in market prices for export commodities of Kazakhstan forced NBRK to change the exchange rate regime from fixed to the floating one.

Fixed rate as a monetary policy instrument completely lost its relevance, since it contradicts natural market tendencies, distorting them and thus limiting the possibility of implementing counter cyclical policies. A fixed rate is advantageous when Kazakhstan's export price is growing along with excessive profit obtained from the sale of resources that exceed the outflow of relevant resources. In this case fixed exchange rate mechanism can artificially maintain economic well-being. The era of expensive resources is ending. It is necessary to adjust to a new stage of economic development, which in the end will provide low oil prices. This will entail a critical decline in reserves allocated for fixing rates. NBRK has been planning smooth transition to a floating exchange rate. Gradual withholding tenge liquidity led to some deflationary phenomena, such as tenge overvaluation, trade balance shift toward imports, low business activity, the lack of funds for commercial transactions, GDP reduction. This caused low inflation (3-4%) in August 2015. NBRK feels the impact of several negative factors: devaluation of currencies in the two neighboring trading partner countries - Russia and China, along with ‘cooling’ of the Chinese economy; therefore NBRK did not provide a gradual smooth transition to a floating exchange rate. NBRK considered the fact that economic agents possess a large proportion of cash that could be used by them for speculation, as well as access to cheap sources. In order to eliminate internal factors affecting fluctuation of the national currency, the controller stabilizes the exchange rate by means of forced interventions, simultaneously restricting access to the liquidity of commercial banks (Ghosh et al. 2016).

Comparative analysis of economic policies of the Customs Union (CU) member states is shown in Table 5.

Table 5. Some inconsistencies of macroeconomic policies (in the sphere of currency regulation and control) of CU member states and their solutions

Inconsistency Solution

In exchange control mechanisms (list of documents, procedure) Creating a common documentary, methodical and methodological approaches in conducting exchange control

In currency regulation mechanisms: - Compulsory sale of foreign exchange earnings in the Republic of Belarus, canceled in Kazakhstan and Russia - Restrictions of currency transactions, account opening

Harmonization of regulatory and legislative framework in terms of currency regulation order

In the monetary policy mechanism Standardizing foreign exchange restrictions on transactions related to the balance of payments and capital movement

Source: Kondratov (2015).

Devaluation was inevitable primarily due to the strong dependence of Kazakhstan on oil prices. There is a

general slowdown in the global economic growth and it depends primarily on political conflicts and sanctions. Despite the floating exchange rate of tenge, the state continues maintaining its rapid decline. Kazakhstan needs to develop its industrial sector as well as small and medium enterprises in order to be less dependent on imported goods, thus moving away from raw-material orientation.


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Conclusion Devaluation of the Kazakhstani tenge is well ahead of inflation and poses a threat to economic growth fostering deep economic crisis. In the future, exchange rate dynamics is determined mainly by external factors, such as oil prices, the US Federal Reserve rate and the state of the neighboring economies.

Keeping in mind the export-oriented economy of Kazakhstan, introduction of both inflation ‘bullying’ and floating exchange rate is a very hasty measure, which can be extremely inefficient without relevant structural reforms. In order to level external shocks affecting the tenge exchange rate, NBRK increased interventions aimed at correcting the volatility rate dynamics. In this regard, it is more expedient to provide targeting of the real GDP growth and the growth of money supply in the economy, which in turn will encourage implementation of structural reforms aimed at increasing the real capital. Also in the long term, one should find the optimal percentage of liquidity absorption and interest rate outpacing liquidity expansion, which will ensure continued GDP growth.

EAEC member states need to provide favorable conditions for using national currencies in mutual trade and financial transactions and a gradual withdrawal from the dollar dependence. To this end, one should provide consolidated financial markets, single payment system, etc; monetary policy development and innovations; development of new methods for calculating current exchange rate quotations and normative legal acts aimed at the convergence of currency transaction rules etc. References [1] Adler, M., and Dumas, B. 1984. Definition and Risk  : Measurement. Financial Management, 13(2): 41–50.

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Web: www.asers.eu URL: http://www.asers.eu/asers-publishing E-mail: [email protected] ISSN 2068-696X Journal DOI https://doi.org/10.14505/jarle Journal’s Issue DOI https://doi.org/10.14505/jarle.v7.5(19).00

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