Free floating of tenge will be a kind of "airbag" to Kazakhstan from external shocks and preserve the sovereign balance - Fitch

Almaty. August 21. Silkroadnews - "Free floating tenge will be a kind of "airbag" to Kazakhstan for external shocks faced by the country in connection with the fall in oil prices and foreign exchange imbalances, and help keep the sovereign balance sheet. But it highlights the current economic pressures and carries a risk, for example through the potential impact on banks and the confidence of the private sector", - stated in the information, international rating agency Fitch Ratings.
According to Fitch, tenge lost 22% of its value against the dollar on Thursday after the prime minister and central bank chief said that the regulation of the trade dollar-tenge was canceled. It sank to it's minimum - 257,2 tenge/$1.
"The sudden transition from financial pressure to free floating exhibit the intention of gradual transition to inflation targeting, and the possibility of a controlled amortization (National Bank raised the upper limit of the rate of tenge in July). The decline in oil prices led to a deterioration of the current account, and the devaluation expectations put pressure on the capital account, as funds flow from assets in tenge to foreign currency", - stated in the text.
At the same time rating agency took into account the pressure of exchange rates and long-term key reasons, when Fitch affirmed Kazakhstan at the level "BBB +" / stable in May, including 20% depreciation of the tenge against the end of 2015.
Furthermore, Fitch expects that the draft budget for 2016, which will be submitted to Parliament before 1 September, will be based on a reasonable price for oil (as was in the case with the budget of 2015) and will include a more cautious fiscal policies.
At the same time Kazakhstan's banking system is vulnerable because of the shock of the exchange rate and its impact on asset quality. Extensive pressure on the currencies of developing countries after the devaluation of the yuan in China and falling commodity prices may also limit the growth of the competitiveness of the fall of tenge.