MOSCOW (AP) — Kazakhstan currency plunged by over 20 percent against the dollar on Thursday after the government decided to move to a free float to cope with big swings in global currencies and commodity prices.
The collapse follows a slump in the price of oil, Kazakhstan's main export, and drops in the value of the currencies of the country's main trading partners, Russia and China.
The Kazakhstan Stock Exchange said the currency, the tenge, was trading at over 250 to the dollar Thursday afternoon after closing at 197.05 the day before.
Local media in Kazakhstan reported Thursday that the fall in value of the tenge had triggered a rush to buy luxury imported goods ahead of expected price rises and that many currency exchanges had closed for the day.
In a statement, Prime Minister Karim Masimov said the government and central bank had implemented the free float as part of "a new money and lending policy based on a regime of targeting inflation" and preventing a fall in employment.
However, the government said the central bank will still intervene in currency markets on domestic markets if it perceives "the emergence of threats to destabilize the country's financial system."
The policy change comes a day after President Nursultan Nazarbayev ordered a reduction in the deficit to prepare for a possible further crash in the price of oil, which he said could drop as low as $30 a barrel. The international crude oil contract traded at over $100 a barrel at the start of last year, but has since dropped to below $47, hurting Kazakhstan's economy and government finances.
"In recent years we have built much, increased staffing and wage levels," said Nazarbayev, who has ruled the oil-rich Central Asian state since independence from the Soviet Union in 1991, in comments released by his office.
"However, now we observe a lack of funds. In connection with this, expenditure on new projects will be strictly limited by opportunities to increase the income base."
Nazarbayev also said he expected low commodity prices could continue for a further five years and that Kazakh exports had been hurt by low demand in Russia and China.