ALMATY/JAN. 21 2021 (The Bulletin) — In an attempt to both modernise the Central Bank’s decision-making process and to inject some confidence into its currency, Kazakhstan set up a Monetary Policy Committee that will oversee interest rate setting decisions and inflation targets.
When it comes into operation later this year the committee will be the first focused on monetary policy in Central Asia and will, eventually, include independent economists.
“The establishment of the Monetary Policy Committee is in line with the best practices of inflation–oriented countries and will increase the efficiency and transparency of monetary policy decisions,” the Central Bank said in a statement.
Like other currencies in the Central Asia and South Caucasus regions, the impact of the coronavirus pandemic has buffeted Kazakhstan’s tenge, forcing it down to below 450/$1 in March last year from around 380/$1 in January. It is now trading at 420.4/$1.
Confidence in the tenge was already weak before the coronavirus pandemic as the Central Bank was blamed for its collapse in 2014 after a sharp fall in oil prices.
And it was perhaps with this in mind that Kazakh President Kassym-Jomart Tokayev ordered, in September last year, a Monetary Policy Committee to be set up. The order also came during a more general modernisation of the Kazakh Central Bank. It has dusted off plans to shift its headquarters to Nur Sultan from Almaty. The original plan was scrapped in 2015 after the economy went into recession.
On its new Monetary Policy Committee, analysts said that the Central Bank needs to move quickly to bring in independent economists. And the Central Bank agreed.
“In the medium term, the Committee will include independent members who specialise in macroeconomics and monetary policy and have extensive experience,” it said.
In its last interest rate setting decision, in December last year, the Kazakh Central Bank kept its core interest rate at 9%, saying that inflation was stable.
— This story was first published in issue 469 of the Central Asia & South Caucasus Bulletin
— Copyright the Central Asia & South Caucasus Bulletin 2021