Fitch: Kazakhstan to conduct devaluation of its national currency

Fitch Ratings has presented its report 'Russian slowdown hits CIS states'.

The agency says that the slowdown in Russia’s economy is a significant shock for the economies of other CIS countries, but the impact on these countries’ credit profiles varies considerably.

Armenia and Ukraine have the most direct exposure among Fitch-rated states, while the steep fall in oil prices has magnified the fallout in Kazakhstan and Azerbaijan. Direct Russian exposure relative to GDP is lower in Kazakhstan and Azerbaijan, but the impact of the rouble’s depreciation on their fixed currencies is a major indirect channel of contagion - particularly in a context of lower oil prices, abc.az reports.

“Azerbaijan has responded by devaluing the manat and shifting from a US dollar peg to a euro/dollar basket. We believe there is a high possibility Kazakhstan could also devalue, as the tenge’s real effective exchange rate has depreciated to levels last seen before the February 2014 adjustment. Devaluation poses risks for both states, but they have strong buffers,” the report says.