National Bank of Kazakhstan to reintroduce mandatory sale of 50% of FX revenues by quasi-public corporations

ASTANA. Nov 19 (Interfax) - The National Bank of Kazakhstan will reinstate the requirement for quasi-public entities to sell 50% of foreign currency revenues, the deputy governor of the National Bank, Aliya Moldabekova, said.

"The decreasing balance between supply and demand in the foreign currency market has had a negative impact on the investment climate, leads to an increase in the cost of investment projects and produces a pro-inflationary effect. In order to improve the situation in the foreign currency market, we will reintroduce the mandatory requirement to sell 50% of foreign currency revenues by the entities of the quasi-public sector," Moldabekova is quoted as saying in a Tuesday press release.

The relevant government resolution and order of the National Bank have already been drafted and will be adopted in the coming days, according to the press release.

The requirement for quasi-public companies to sell 75% of their FX revenue was introduced in 2020 as a response to worsening external conditions. The threshold was lowered to 50% in February 2023 and to 30% in July 2023.

The government in August 2023 suspended the requirement to sell 30% of FX revenue until January 1, 2025, as the currency market had stabilized. The government, the decision would allow the quasi-public corporations to better control their foreign currency flows.

Moldabekova said several external and internal factors had caused the tenge to weaken, including persistent high volatility and global economic risks.

"We can see pessimistic tendencies in the oil market due to a slow recovery of global demand and an expected growth in supplies from OPEC+. This has led to a decrease in oil prices to $71-$72 per barrel," she said.

On the other hand, demand for foreign currency in the domestic market is growing on the back of limited supply, Moldabekova said.

"The rise in demand for foreign currency is driven by an increase in economic activities, including foreign economic activities. Increasing expenditures by the government and the quasi-public sector on infrastructure and investment projects is also a contributing factor here. All these factors together cause the imports to grow and the demand for foreign currency also to increase," she said.