Utility tariffs have increased by 21.1%. This was announced today during an extended government meeting with the participation of the head of state by the Chairman of the National Bank, Timur Suleimenov, as reported by a correspondent from the Kapital.kz business information center.
According to him, last year, as a result of the moderately strict monetary policy of the National Bank and government measures, inflation in the country decreased by 2.5 times from the peak values of 2023 to 8.6%. Food inflation was 5.5%, while non-food inflation reached 8.3%. This contributed to the overall slowdown in inflation.
“The primary inflationary contribution came from the prices of regulated and unregulated services. Market services rose by 11.5%. On average, utility tariffs increased by 21.1% against the backdrop of the implementation of the 'Tariff in Exchange for Investments' program. At the same time, since the program's implementation began, it has attracted over 600 billion tenge in investments into the utility sector. The contribution of utility services to inflation was below the forecast at 1.1 percentage points,” he noted.
The ongoing complex geopolitical tensions in the world significantly affected the commodity, financial, and currency markets in 2024. In these conditions, the global economy grew by 3.2% in 2024.
“Kazakhstan's economy developed under conditions of lower oil prices and reduced production levels. Despite this, the country's economy demonstrated positive dynamics, with a growth of 4.8%. To ensure economic growth and macroeconomic stability, a comprehensive set of effective measures has been developed in cooperation with the government to address imbalances between monetary and fiscal policy,” Timur Suleimenov reported.
The currency market last year was influenced by the global strengthening of the dollar, ongoing geopolitical tensions, and volatility in key export prices.
“There is increased demand for currency within the country, partly due to large inflows. The volume of dollar trading on the Kazakhstan Stock Exchange rose by almost 50%. In conditions of fairly limited currency supply, the tenge depreciated by 15.5%,” the head of the National Bank clarified.
As part of the current currency regime to promote market balance, the National Bank has taken a number of measures, including a transition to monetary neutrality regarding gold purchasing operations. This significant measure will reduce tenge issuance by approximately 3 trillion tenge and increase foreign currency supply by 5.5 to 6 billion dollars annually.
“Together with the government, we resumed the mandatory sale of half of the foreign currency earnings of the quasi-state sector. To smooth out excessive exchange rate fluctuations, interventions were conducted, and checks on the justification of currency operations are being carried out in 12 banks and financial organizations. We have enhanced compliance and monitoring of currency operations, reinstated the regulation of spreads at exchange points, and shortened the reporting period for banks on currency operations,” he emphasized.
As a result of the measures taken, the effects of excessive, speculative demand for currency have been mitigated. We believe that in the absence of significant external and internal shocks, the tenge has found its new fundamental level.
“Regarding international reserves. During a period of high global volatility and large amounts of external debt repayments, we increased their volume by 27.4%. International reserves reached a historical maximum of 45.8 billion dollars. According to international practice, the volume of reserves should be sufficient to cover 3-6 months of imports. In our case, it covers 7.4 months. We consider this important during periods of global instability,” the Chairman of the National Bank clarified.
He reminded that in challenging fiscal conditions, the government was forced to increase withdrawals from the National Fund to 6.3 trillion tenge. Of this, direct transfers amounted to 5.6 trillion, and the purchase of shares totaled 467 billion. Additionally, bonds worth 238 billion were acquired for financing infrastructure projects.
“At the same time, thanks to the transition to balanced asset allocation, investment income amounted to 4.5 billion dollars or over 7.5% per annum. This is twice the historical average yield. The total volume of foreign currency assets in the National Fund reached 58.8 billion dollars. It should be noted separately that we, as the fund's managers, have found an optimal investment approach with the government for investing funds in Kazakhstani projects,” he concluded.
Previously, bonds purchased by the National Fund in the last decade were acquired for unreasonably long terms and at absolutely non-market rates. This led to direct and significant losses for the fund.
“Now we have brought the conditions closer to market ones. This will ensure a balance between the interests of the fund for future generations and the importance of implementing strategic projects. Furthermore, to ensure financial discipline and maximum economic returns, a new project assessment mechanism has been developed in collaboration with the government for projects financed from the National Fund. Mandatory co-financing from the financial sector is anticipated. This will reduce pressure on the National Fund while engaging market liquidity,” the head of the National Bank emphasized.