National Fund Transfers Accelerate Inflation — National Bank

Kazakhstan's National Bank head, Timur Suleimenov, believes that the volume of withdrawals from the National Fund has reached critical values and is starting to accelerate inflation, Orda.kz reports. 

The budget continues to rely heavily on transfers from the National Fund. As a result, the non-oil deficit remains high. This year, the volume of direct transfers from the National Fund will amount to 5.6 trillion tenge, and the total withdrawal of funds will exceed 6 trillion tenge. At the same time, both the volume and the directions of spending the National Fund are important. It is important that the funds from the National Fund are used to finance real projects aimed at creating an additional volume of Kazakhstani goods. The quality and productivity of these expenses are also important, Suleimenov said at a Senate meeting.

The dollar strengthening is an additional inflationary factor. 

However, Suleimenov recalled that the high dollar exchange rate against the tenge is a derivative of supply and demand. And it is primarily influenced by the general state of the republic's economy.

If there is a large amount of foreign currency on the market, then the price per unit will be lower.

Thus, the country needs foreign investment, which is converted into authorized capital. 

The health of the balance of payments is an excess of exports over imports, an excess of net investments in the country, that is, both gross investments and the outflow of investments should be in the positive zone. That is, these are macroeconomic prerequisites for the economy to be healthy and, accordingly, the exchange rate, Suleimenov added. 

The National Bank is conducting currency interventions to strengthen the tenge and recently raised the base rate to 15.25%. The regulator also plans to sell part of the foreign exchange earnings. 

Original Author: Ilya Astakhov