Kazakhstan macro: the tenge needs to weaken further

KAZAKHSTAN - Report 12 Aug 2025 by Evgeny Gavrilenkov

In its most recent monthly statement on the FX market (published on August 1) the National Bank of Kazakhstan mentioned that trading activity increased last month and the tenge weakened by 4%. Total trade volume reached $5.7 bln, of which $0.7 bln was accounted for by FX sales from the National Fund. The NBK also mentioned that it absorbed KZT290 bln to partially sterilize tenge liquidity by selling dollars it previously bought from gold exports by local gold miners. The bank also reported that mandatory FX sales by quasi-state companies amounted to $0.45 bln last month. Overall, these interventions and mandatory FX sales accounted for a significant chunk of the overall market turnover, especially if one adds $125.8 mln of direct FX sales by the NBK on July 30 to ease “speculative pressure” on the market, as the regulator described it.

Our longstanding point of view is that the tenge’s gradual weakening was (and still is) a natural trend—as long as inflation in the country is high. Therefore the base rate remains elevated, with no sign of its coming down significantly anytime soon. Hence, talking about speculative pressure that has recently mounted on the tenge is not entirely correct. The tenge weakened against the dollar at the end of July in line with other currencies as, for instance, the dollar temporarily appreciated against the euro to the 1.14-1.15 range as opposed to a more “usual “recent 1.16-1.17 range. On top of that, one should keep in mind that the money supply in Kazakhstan has been growing fast in recent months and that this growth was associated with the allocation of budgetary funds. Therefore, pressure on the tenge appears to be caused by fundamental, not speculative factors. Unless budgetary policy is corrected (i.e., becomes less generous) and the exchange rate comes closer to an equilibrium, distortions will keep accumulating—even though economic growth could remain high amid elevated inflation (at the expense of decreasing reserves).

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