NAZARBAEV STRESSES INDEPENDENCE FROM RUSSIA.

Kazakhstani President Nursultan Nazarbaev stated on September 1 that his country will weather the storm of Russia’s financial crisis. Echoing the earlier joint statement by the government and National Bank (NBK) (see the Monitor, August 31), Nazarbaev declared that the two countries’ financial systems “divorced long ago and are no longer related. Russia and Kazakhstan act and work as completely sovereign states.” He assured parliament that the government was fulfilling virtually every point of his directives and that Prime Minister Nurlan Balgimbaev’s dismissal was not an issue. (Reuter, September 1)

Compared with the recent mayhem in Moscow’s financial markets, Kazakhstani macroeconomic adjustments to the Asian and Russian financial crises have been minor. For example, on August 5 the NBK raised the refinancing rate from 18.5 to 20.5 percent, coinciding that week with a downward revision of projected GDP 1998 growth from three to 1.5 percent. While the ruble has dived, the tenge has been relatively stable. Devaluation has been consistently ruled out by official spokesmen. The situation is further abetted by an illiquid stock market, with the flotation of Kazakhstani blue chips repeatedly delayed.

Nevertheless, Russian influence on Kazakhstan’s real economy is hard to deny, with Russia still by far Kazakhstan’s most important trading partner–Russia received 31 percent of Kazakhstan’s exports in the first half of the year and supplied 42.5 percent of its imports. Nor does the August hike in interest rates appear to have countered the effect of rising treasury bill yields: On September 1, Kazakhstan’s Finance Ministry canceled a planned three-month treasury-bill auction on the grounds that markets were demanding inflated yields. And local analysts speculate that a devaluation of the tenge might follow a growing demand by Kazakhstani businesses and citizens for hard currency. To draw funds to tenge-dominated treasury bills, the NBK on September 7 announced a rise in the rate of its short-term credits to commercial banks. (Reuter, September 7)–SC

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