One of Kazakhstan’s biggest worries amidst growing oil revenue is the appreciation of its currency, the tenge. That is, in its narrow interpretation, the core indicator of the Dutch Disease. If the tenge is strong against the dollar, Kazakh non-oil exports are negatively affected (because they are more expensive and thus less competitive).

The Kazakh national bank has taken a proactive policy on keeping exchange rate appreciation in check. So for example in the fourth quarter of 2004, when it bought dollars on a large scale to take some pressure off the tenge.

With oil prices hitting record highs, Kazakhstan can enjoy unprecedented windfalls but has to pay extra attention not to let the tenge drift away. One way to do this is to keep taxes paid by international corporations abroad, denominated in foreign currencies (thus ’sterilising’ revenue).

But that might not be enough, and Kazakhstan’s National Bank has taken precautionary steps:

We have bought almost USD 4 bln. According to the foreign experts, noninterference in the foreign exchange market, i.e. non-acquisition of dollar will contribute to tenge strengthening.

And it might still not be enough:

For the past three days of the current week the bank purchased no dollars. As a result the worth of the US dollar decreased by KZT 2 for two days.

Also, the dollar fixation does not tell the whole story. Kazakhstan’s main trading partner is Russia (which has similar exchange rate problems due to its massive hydrocarbon exports), after which comes the Euro-denominated zone. It is thus more important to closely monitor the developments of the tenge/rouble and tenge/euro exchange rate.

So while from 2000 to 2005 the tenge appreciated by some 28 percent against the dollar (with most of the appreciation occurring in 2003–04, the two years of record-high oil prices), the tenge even depreciated against the rouble between 2000 and 2004.