Kazakhstan macro: Exchange rate in the spotlight amid tariff games
The USD/KZT has been on a roller coaster in recent months, pushed up and down by various factors. After several months of natural depreciation that lasted until the end of January 2025, when the USD/KZT tested 530 in mid-January, the Kazakh currency moved below 500 a month later. Now, it is approaching the 520 mark again, as in recent days, it traded between 514 and 517. In our previous reports, we covered these developments and attributed the tenge’s recent appreciation swing to an even greater appreciation of the ruble against the dollar. As the Kazakh and the Russian economies are still closely connected, the tenge had no choice but to react to the ruble’s move.
These days, the tenge’s own pirouettes have also stemmed from a number of external factors—mainly associated with tariff games. Markets worldwide have been shaken by the risks of a global recession, rising inflation, etc. Oil prices dropped close to $60/bbl (Brent), and if they stay at this level for long, the Kazakh balance of payments may be hit, thereby placing more pressure on the tenge.
It is almost certain that Kazakhstan may face additional challenges amid continuous global uncertainty, while the government will face a dilemma—either to allow the tenge to weaken further or to tap reserves to finance budget expenditures (we think that cutting expenditures is not being considered). Realistically, it could be some combination of both options. Tapping reserves may create additional problems for the future as the current account deficit will likely persist due to continuous repatriation of profits by foreign investors.
It looks as though Kazakhstan will need to start trimming its imports (unless oil prices soar or export volumes rise considerably). A weaker tenge could help not only manage the budget properly, but the external balance, as well.
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