The National Bank explained why controlling inflation in Kazakhstan has been challenging.

The Deputy Chairman of the National Bank, Vitaly Tutushkin, spoke in the Senate about the inflation rates in Kazakhstan, according to Orda.kz.

https://orda.kz/v-nacbanke-rasskazali-pochemu-ne-udaetsja-unjat-infljaciju-v-kazahstane-394690/2024-11-21 07:31:31

“Despite the overall downward trend throughout the year, inflation accelerated to 8.5% year-on-year in October compared to September. This figure is already more than 2.5 times lower than the peak levels observed in February 2023. However, this level is still significantly above the National Bank's target of five percent. (...) The highest growth continues to be shown by inflation in paid services — 14.3%,” said Vitaly Tutushkin.

He discussed the inflationary risks that remain relevant. Externally, these are driven by rising prices in key partner countries and increasing global food prices.

“Domestic factors include the ongoing rise in utility tariffs, sustained high domestic demand amid fiscal stimulus, and unanchored inflation expectations. We see that the non-oil deficit remains high, and a significant portion of budget expenditures still relies on transfers from the National Fund,” he stated.

The Senate speaker Maulen Ashimbayev noted that a decrease in inflation should not be anticipated.

“It will not decrease because there are serious factors influencing its increase. Therefore, it is very important for the National Bank and the financial block of the government to work together swiftly and conduct a coordinated approach to ultimately ensure the country's economic growth,” he added.

He also mentioned that the government is withdrawing money from banks through securities to finance the growing budget deficit.

“Consequently, we are pulling money from the market and making it more expensive. How can there be economic growth under such conditions? These are all clear and obvious categories. This is what the deputies are inquiring about, and we certainly hope for more decisive actions from the financial block of the government,” said Maulen Ashimbayev.

Over the past week, the tenge has sharply weakened, with some exchange offices asking for 500 tenge for one dollar. According to the National Bank, several factors contributed to the weakening of the tenge: the global strengthening of the dollar (+5.5% to the DXY dollar index since the end of September), pessimistic sentiments in the oil market due to low demand and expected increases in supplies from OPEC+, and rising demand for foreign currency in the domestic market. The increasing budget and quasi-public sector expenditures on investment projects have also fueled import growth.