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ASTANA, Jan 19 (Reuters) - Any weakening of Kazakhstan’s national tenge currency against the dollar this year should be capped at 10 percent, Economy Minister Bakhyt Sultanov said on Monday.
Low prices for oil and metals, Kazakhstan’s key exports, are putting the pressure on the tenge to devalue, but such a move would hurt banks which have about $40 billion in foreign debt.
“We think that the devaluation limit is 10 percent and it should be smooth and spread over a long period of time,” Sultanov told reporters. “This is what our financial system would be able to withstand.”
The Russian rouble and the Ukrainian hryvnia have devalued significantly over the last few months leading to a decrease in the prices of imported goods for Kazakh consumers and a tougher competition for local producers.
“We need to find a balance here,” Sultanov said.
“A sharp devaluation would make it harder for the financial system to repay external debt. On the other hand, (Kazakh) companies’ competitiveness is undermined by devaluation in the neighbouring countries.”
Kazakhstan, hit hard by the global financial crisis, unofficially pegged the tenge to the dollar in late 2007 and kept the exchange rate between 120 and 121 tenge throughout last year, a task made easier by high oil prices at the time.
But last week the rate KZT= broke out of the corridor with the tenge falling below 121.0 per dollar. The central bank had earlier said it defined acceptable exchange rate fluctuations as plus or minus five percent a year.
Kazakh banks are due to repay $10.6 billion in foreign debt this year and another $7 billion in 2010. (Reporting by Raushan Nurshayeva; Writing by Olzhas Auyezov; Editing by Tomasz Janowski)