JPMorgan - KASE

privatization revenues, weakened the tenge. The NBK supported the Tenge by intervening in the
foreign exchange markets. Such intervention, together with the servicing of Kazakhstan’s
external debt, resulted in a decline of foreign exchange reserves. See “ – Balance of Payments
and Foreign Trade – Official International Reserves.”
In April 1999, the NBK and the Government publicly announced that they would cease to
intervene in the foreign exchange markets to support the Tenge, allowing the exchange rate to
float freely. Such decision was supported by international financial organizations such as the IMF.
As a result, the Tenge devalued from a pre-announcement rate of 88 Tenge per U.S. Dollar to a
rate of about 130 Tenge per U.S. Dollar by May 1999. Since then, the Tenge has continued to
decline in nominal terms against the U.S. Dollar. During 2000 the Tenge depreciated in nominal
terms against the U.S. Dollar by 5.2 per cent. and during 2001 it depreciated by 3.81 per cent.
The following table sets out the average and period-end Tenge/U.S. Dollar exchange rates
reported by the NBK:
Average Period-end
31 December 1997 .................................................. 75.44 75.55
31 December 1998 .................................................. 78.30 83.80
31 December 1999 .................................................. 119.53 138.20
31 December 2000 .................................................. 142.13 144.50
31 December 2001 .................................................. 146.74 150.20
30 June 2002 ....................................................... 152.55 153.1
Source: NBK
Foreign Exchange Regulations
Kazakhstan has accepted the conditions of paragraphs 2, 3 and 4 of Article VIII of the IMF Charter
and, as a result, has agreed not to introduce or increase any exchange rate restrictions, introduce
or modify any practice of multiple exchange rates, enter into any bilateral agreements violating
Article VIII or impose any import restrictions. In accordance with Article VIII, a new law on
currency regulation was adopted in 1996. According to this law, all current account operations,
including transfers of dividends, interest and other investment income, may be made without
restriction. Only outflowing capital account operations need to be licensed by or registered with
the NBK. Capital inflows are registered and monitored for statistical purposes only, but are not
restricted.
New licensing rules adopted at the beginning of 2002 liberalized the treatment of the outflow of
capital. The NBK intends to further liberalize licensing rules in the next few years. One of the
purposes of liberalization is to avoid the pressure caused by the influx of dollars into Kazakhstan
due to high market prices for Kazakhstan’s export goods by directing export revenues abroad.
Public Debt
As a percentage of GDP, total public debt decreased in 2000 from 26.7 per cent. of GDP at 31
December 1999 to 21.6 per cent. of GDP as at 31 December 2000. In nominal terms, Kazakhstan’s
total public debt has grown from 139.6 billion tenge at 31 December 1994 to 560.2 billion tenge
at 31 December 2000. The growth in public debt has come primarily from external borrowing and
has been used to finance budget deficits.
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