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RPT-INTERVIEW-Kazakh tenge is now "balanced" - sovereign wealth fund boss
November 3, 2015 / 8:21 AM / 2 years ago

RPT-INTERVIEW-Kazakh tenge is now "balanced" - sovereign wealth fund boss

(Repeats Monday’s story to additional clients; no change in text)

By Claire Milhench and Karin Strohecker

LONDON, Nov 2 (Reuters) - Kazakh sovereign wealth fund Samruk-Kazyna will not exert pressure on its companies to convert their dollar holdings into the local tenge currency, CEO Umirzak Shukeyev said on Monday, describing the exchange rate as “balanced” after a sharp depreciation since August.

Samruk-Kazyna manages state-run stakes in major Kazakh companies ranging from oil and gas to railways, airlines, uranium and a football club.

Kazakhstan, the second-largest post-Soviet oil producer after Russia, has been hit hard by a collapse in world oil prices and the weakening of the currencies of Russia and China, its major trading partners.

“It’s a tough time, a global crisis. Since we are a commodity export-oriented economy, the price reduction of course had its impact on our economy,” Shukeyev said in an interview during a visit to London.

He acknowledged that, like many resource-led economies, Kazakhstan had an issue with dollarization -- the situation in which companies and individuals prefer to hold funds and conduct transactions in dollars because they see the greenback as more stable than the local unit.

The central bank abandoned its pegged exchange rate policy on Aug. 20 after the oil price had fallen by more than half since summer 2014, and trading partners China and Russia had devalued their currencies.

The tenge has lost around a third of its value against the dollar in less than three months.

The government and the central bank are the main sellers of foreign currency, while the private sector and even state-owned companies have preferred to keep their cash in dollars, fearing further devaluation.

Yet having looked at the balance sheets of Samruk’s holdings, the ratio between dollar and tenge holdings had not changed for the past few years, and the foreign currency reserves matched the need to pay for imports or meet foreign currency debt obligations, Shukeyev said.

“No pressure should be put on the companies because these deposits are connected with the operational activities - this field we cannot interfere in,” he said, speaking through a translator. “We have to watch our companies ... but they are not panicking.”

While past currency corrections had been necessary following those of China and Russia, he said “the exchange rate is balanced now”.

During the 2008 financial crisis and the subsequent oil price collapse, Samruk had to step in to prop up a number of banks which defaulted on their dollar debt. But this was not the case now, he said.

“(Banks) are in a stable position. We have a problem with the big companies who are exporters and small businesses,” he said. “For the banks, we have a government programme that will help them.”

Yet credit ratings agency Moody’s said on Monday the widening gap between foreign-currency loans and foreign-currency deposits at Kazakh banks was “credit negative” for the country.

Citing data from the National Bank of Kazakhstan, Moody’s said the gap had widened to 5.7 trillion tenge ($20.3 billion) or about 27 percent of banks’ total assets on Oct. 1, from 600 billion tenge or 4 percent of assets at the start of 2014.

The economy is projected to grow just 1.5 percent this year. ($1 = 281.1000 tenge) (Editing by Mark Trevelyan)

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