KAZAKHSTAN'S CENTRAL BANK KEEPS ITS PROMISE TO DEPOSITORS

 

31  JAN 00

FM AMEMBASSY ALMATY

 

1.  SUMMARY.  AS IT PREMISED, THE NATIONAL BANK OF

KAZAKHSTAN (NBK) COMPENSATED KAZAKHSTANI BANK

DEPOSITORS FOR THE LOSS IN VALUE OF THEIR TENGE-

DENOMINATED ACCOUNTS THAT OCCURRED WHEN THE GOK

EFFECTIVELY DEVALUED THE NATIONAL CURRENCY IN

APRIL 1999.  THE PROGRAM, WHICH COST THE NBK USD

13.2 MILLION, IS INTENDED TO HELP TO BUILD

ORDINARY KAZAKHSTANIS' TRUST IN THE COUNTRY'S

BANKING SYSTEM.  END SUMMARY.

 

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APRIL 1999:  THE NATIONAL BANK PLEDGES TO SUPPORT                                                   

PRIVATE DEPOSITORS AFTER THE TENGE DEVALUATION

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2.  ON APRIL 5, 1999, THE GOVERNMENT OF KAZAKHSTAN

("GOK") AND THE NATIONAL BANK ANNOUNCED THAT THEY

WOULD NO LONGER SUPPORT A FIXED RATE OF EXCHANGE

FOR THE TENGE.  THE GOK DECISION WAS APPARENTLY

MOTIVATED BY SHRINKING HARD CURRENCY RESERVES, THE

GROWING TRADE DEFICIT AND DOMESTIC PRODUCERS'

INABILITY TO COMPETE.

 

3.  THE NBK, REALIZING THAT THE DEVALUATION WOULD

BADLY ERODE THE VALUE TENGE-DENOMINATED ACCOUNTS

AND POSSIBLY DISCOURAGE USE OF THE BANKING SYSTEM,

DECIDED TO OFFER COMPENSATION TO INDIVIDUAL

CUSTOMERS HOLDING MONEY IN LOCAL BANKS.  IF THESE

BANK DEPOSITORS KEPT THEIR MONEY ON DEPOSIT IN THE

BANK FOR AT LEAST NINE MONTHS FOLLOWING THE

DEVALUATION, THEY WOULD BE OFFERED THE OPTION TO

CONVERT THEIR TENGE DEPOSITS INTO U.S. DOLLARS AT

THE PRE-DEVALUATION EXCHANGE RATE OF 88.3 TENGE

PER ONE U.S. DOLLAR (USD).

 

4.  THE NATIONAL BANK HAS NOT MAKE PUBLIC THE

AMOUNT OF TENGE-DENOMINATED DEPOSITS WITHDRAWN

FROM THE BANKS IN APRIL 1999.  PERHAPS BECAUSE OF

THE COMPENSATION PROGRAM, HOWEVER, THE EVALUATION

DID NOT CAUSE A PANIC AMONG KAZAKHSTANIS.  IN

GENERAL, THERE WERE NO LINES FOR USD AT THE STREET

EXCHANGES OR SUBSTANTIAL NUMBERS OF DEPOSITORS

WITHDRAWING THEIR MONEY FROM BANKS.

 

5.  OVER 154 THOUSAND DEPOSITORS, HOLDING USD 36

MILLION, SIGNED CONTRACTS IN WHICH THEY AGREED TO

KEEP THEIR MONEY ON DEPOSIT FOR AN ADDITIONAL

NINE-MONTH PERIOD.  AT THE END OF THAT PERIOD,

THEY WOULD BE OFFERED THE OPTION TO EXCHANGE THE

TENGE AT THE PRE-DEVALUATION EXCHANGE.RATE.  THESE

USD 36 MILLION REPRESENTED ROUGHLY 11 PERCENT OF

THE USD 33O MILLION TOTAL HELD BY INDIVIDUALS IN

THE LOCAL BANKING SYSTEM.   (NOTE:  BECAUSE OF A

HISTORY OF HIGH INFLATION AND VOLATILE EXCHANGE

RATES OF THE TENGE, KAZAKHSTANI CITIZENS HOLD

APPROXIMATELY ONE HALF OF THEIR TOTAL SAVINGS AS

U.S. DOLLAR-DENOMINATED BANKING DEPOSITS.  AT THE

TIME OF THE APRIL 1999 DEVALUATION, USD-

DENOMINATED ACCOUNTS TOTALED ROUGHLY USD 17O-180

MILLION.  END NOTE.)

6.  IN ADDITION TO THE EXCHANGE RATE INCENTIVE

OFFERED BY THE NBK, MOST COMMERCIAL BANKS PAID

INTEREST AVERAGING EIGHT PERCENT PER ANNUM ON THE

NINE-MONTH DEPOSITS.

 

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JANUARY 200O:  KAZAKHSTANI DEPOSITORS RECEIVE

COMPENSATION AS PROMISED

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7.  AS SCHEDULED, FROM JANUARY 5 THROUGH JANUARY

15, COMMERCIAL BANKS TRANSFERRED THEIR

PARTICIPATING CLIENTS' TENGE TO THE NATIONAL BANK

AND THE NBK EXCHANGED THE MONEY FOR U.S. DOLLARS

AT THE RATE OF 88.3 TENGE PER USD. AS OF JANUARY

15, 200O, THE MARKET EXCHANGE RATE WAS ROUGHLY 139

TENGE PER USD.  THE NBK WAS REQUIRED TO ADD

APPROXIMATELY 5O TENGE TO EACH DOLLAR IT CONVERTED

UNDER THE COMPENSATION PROGRAM.  THE NBK, WHICH

WAS OBLIGATED TO CONVERT USD 36 MILLION WORTH OF

TENGE DEPOSITS, EXPENDED ROUGHLY 1.8 BILLION

TENGE, OR USD 13 MILLION, ON THE PROGRAM.  THE

DEPOSITORS CAN NOW WITHDRAW THEIR MONEY IN EITHER

TENGE OR U.S. DOLLARS OR OPEN A NEW ACCOUNT WITH

THEIR BANK.