Andrei Tsalyuk
Informational agency of financial markets �IRBIS�
Almaty, April 12
(Specially for THE GLOBE)
Chronicle
Monday, April 5
At 11:33 above a long list of applications to purchase the dollar, the first �sale� line was glowed red: US$ 100 000 at 100 tenge. It cannot be said that the offer was �seized� at once. It took one or two minutes for a dealer of one of the banks to take the decision: then the line disappeared. The all-around eight month defense of tenge was broken. A few minutes later there was another offer: 100 000 at the price of 100.02. This one was bought at once.
In the evening the Inter-bank non-exchange market closed at the rate of 110.0 (demand) and 150.0 (offer) tenge per dollar. This amount was confirmed by the telephone poll of the traders. The banks could not quote the dollar in the REUTERS informational system as the electronic pages of this system were not designed for three decimal points in the US dollar exchange rate. In the evening some of the dealers purchased dollar at 120 tenge and they did not conceal their gladness.
Tuesday, April 6
During the 17th minute some operations between 115 to 121 tenge per dollar were conducted; moreover, they were executed at the reduced rate. There could not be any hard currency in the frame of obligatory sale by the enterprises-exporters. Then there was a silence and a long positional game. A new compromise on prices was being worked out, which became obvious in 30th minute of the auction. The traders tried to achieve the new aim of 140. The traders succeeded as the rate was formed freely.
Up to the end of the session, the transactions were conducted actively between 139 and 140 tenge per dollar. This seemed to be the result of the auction. But in the last seconds an unexpected thing happened. The offer of the dollar briefly weakened. At 10:59:19 a transaction for 20 000 at the price of 145 was concluded. The sellers, feeling the rate increasing, submitted their offers for sale and the dollar again fell to 141. As a result, the volume of transactions was US$ 3.505 million.
Wednesday, April 7
Having thoroughly analyzed the market of the previous day, the National Bank determined the new official dollar rate � 118.0 tenge per unit. This emphasized that 150 tenge per dollar was hardly the real figure complying with actual �demand/offer� ratio.
On Wednesday all the transactions at the auction were concluded at this rate. The auction volume was US$ 2.425 million. A balance of demand and offer resulted at the price of 118 � 2%. The traders actively quoted the American currency. The rate varied, but no definite strategy to reduce or increase the rate took place. The market developed under conditions of so-called �lateral� trend, and nobody prevented the banks from buying or selling. The average rate was 118.16 tenge per dollar.
Thursday, April 8
The official rate was 118.0. As export receipts appeared at the auction, offers sharply rose over demands. The price of the tenge settled between 113 and 115 per unit. During the auction, demand for the dollar steadily fell, but not for the tenge. This was natural, as the National Bank interfered in this process. As Kadyrzhan Damitov declared at the press conference, the head bank was the main buyer of the American currency at the auctions. If it had not happened, the reduction of dollar exchange rate would have been as unexpected as was its raise on April 5. The average rate of the session was 112.79. The volume of transactions rose to US$ 7.815 million.
Friday, April 9
This day was quiet in comparison with the previous ones, as the forces presented in the market were gradually revealed. The main volume of operations ended at the price of 112.84 to 113.5. tenge per dollar, not varying markedly from the previous day. Shortly before session closed the sellers� game to increase the dollar rate succeeded, and the participators became interested in the price of 115.50 to 116.45. The average rate was 113.69 tenge per unit. The session volume was US$ 5.330 million.
Results
As a result of the introduction of the free floating of the tenge rate, Kazakhstan�s national currency immediately devalued by 13.3%. By the end of the week, the devaluation rate in the short-term trend (week) was 1495/year, the middle-term trend (month) was 359.4/year, and the long-term trend (from the beginning of the year) was 134.2/year. Though these statistics are meaningless today. It should be added that the party that purchased those US$ 200 000 on Monday and sold them on Friday at KASE realized a profit (calculated by the average exchange rate) of 1245.1 over a year. This index characterizes the average rate of tenge�s devaluation in current conditions. In any case, this rate cannot be considered normal. For example, Mr. Kakimzhanov considers (see the last issue of �PANORAMA�) a devaluation, now complying with the interests of local industry to be approximately 3%/month, i.e. 42.6/year.
Summaries
Taking into consideration the above-mentioned facts, the author is not going to disclaim those priorities which were mentioned by the government while explaining the reasons of transfer to the freely floating of tenge rate. The objective is to show that there are some other reasons and that the introduction of this regime will settle these problems positively. In my mind, the summaries of this week are as follows:
1. The shift to the �free floating� is a forced measure and at present the author believes to be less harmful in comparison with the others. In any case, it is better to implement these measures than just to sit and wait till the world crisis is over.
2. The step that we are talking about is a complex one and settles the leading problems of our country: saving the country for a long period of time from default, the collapse of the banking system and the final extinction of the economy.
3. The measures taken seem to be based upon market principles. Non-economic categories, such as consciousness of people, honesty of functionaries and customs officers, and the reduction of corruption are important. But we cannot build up the economy based solely on them.
4. In case of a correct prognosis of perspective development, the shift to �free floating� may create a real base for the introduction of a flexible taxation, which will really promote rebirth of not only export, but import-substituting industries.
It is obvious, that there is no applause. The latest actions have offended almost the entire population which once again have to tolerate the actions and express their civil consciousness. But it is OUR country, and we again have a choice. We should understand that everyone who closes his bank deposit increases the chance that in 9 months the other deposits will not be converted in the promised way.
Yes, there is a risk. There are many �buts�. One of them is that the debt to the people working in organizations financed by the budget is very significant. This was not mentioned in the program. Moreover, it does not suit to its context, though this problem cannot been called one of the key problems of our country. Maybe that is the point, where they deceive.
Prognosis
Let�s abstain. The author was given a lesson in this week. He had to admit that conclusions were made too early, and to concede them a day later. It is possible that conclusions made in this article will be of the same fate. Let�s watch and think together.
But we should think!
We should not demand that somebody be sacrificed for the sake of people. Let everybody who invented this complete the program. At least we will later be able to make somebody responsible.
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