**KAZAKHSTAN'S CENTRAL BANKKEEPS ITS PROMISE TO DEPOSITORS**

** **

31  JAN 00

FM AMEMBASSY ALMATY

 

1.  SUMMARY.  AS ITPREMISED, THE NATIONAL BANK OF

KAZAKHSTAN (NBK) COMPENSATEDKAZAKHSTANI BANK

DEPOSITORS FOR THE LOSS INVALUE OF THEIR TENGE-

DENOMINATED ACCOUNTS THATOCCURRED WHEN THE GOK

EFFECTIVELY DEVALUED THENATIONAL CURRENCY IN

APRIL 1999.  THE PROGRAM, WHICH COST THE NBK USD

13.2 MILLION, IS INTENDED TOHELP TO BUILD

ORDINARY KAZAKHSTANIS' TRUSTIN THE COUNTRY'S

BANKING SYSTEM.  END SUMMARY.

 

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APRIL 1999:  THE NATIONAL BANK PLEDGES TO SUPPORT                                                    

PRIVATE DEPOSITORS AFTER THETENGE DEVALUATION

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2.  ON APRIL 5, 1999, THE GOVERNMENT OF KAZAKHSTAN

("GOK") AND THENATIONAL BANK ANNOUNCED THAT THEY

WOULD NO LONGER SUPPORT AFIXED RATE OF EXCHANGE

FOR THE TENGE.  THE GOK DECISION WAS APPARENTLY

MOTIVATED BY SHRINKING HARDCURRENCY RESERVES, THE

GROWING TRADE DEFICIT ANDDOMESTIC PRODUCERS'

INABILITY TO COMPETE.

 

3.  THE NBK, REALIZING THAT THE DEVALUATION WOULD

BADLY ERODE THE VALUE TENGE-DENOMINATEDACCOUNTS

AND POSSIBLY DISCOURAGE USEOF THE BANKING SYSTEM,

DECIDED TO OFFER COMPENSATIONTO INDIVIDUAL

CUSTOMERS HOLDING MONEY INLOCAL BANKS.  IF THESE

BANK DEPOSITORS KEPT THEIRMONEY ON DEPOSIT IN THE

BANK FOR AT LEAST NINE MONTHSFOLLOWING THE

DEVALUATION, THEY WOULD BEOFFERED THE OPTION TO

CONVERT THEIR TENGE DEPOSITSINTO U.S. DOLLARS AT

THE PRE-DEVALUATION EXCHANGERATE OF 88.3 TENGE

PER ONE U.S. DOLLAR (USD).

 

4.  THE NATIONAL BANK HAS NOT MAKE PUBLIC THE

AMOUNT OF TENGE-DENOMINATEDDEPOSITS WITHDRAWN

FROM THE BANKS IN APRIL1999.  PERHAPS BECAUSE OF

THE COMPENSATION PROGRAM,HOWEVER, THE EVALUATION

DID NOT CAUSE A PANIC AMONGKAZAKHSTANIS.  IN

GENERAL, THERE WERE NO LINESFOR USD AT THE STREET

EXCHANGES OR SUBSTANTIALNUMBERS OF DEPOSITORS

WITHDRAWING THEIR MONEY FROMBANKS.

 

5.  OVER 154 THOUSAND DEPOSITORS, HOLDING USD 36

MILLION, SIGNED CONTRACTS INWHICH THEY AGREED TO

KEEP THEIR MONEY ON DEPOSITFOR AN ADDITIONAL

NINE-MONTH PERIOD.  AT THE END OF THAT PERIOD,

THEY WOULD BE OFFERED THEOPTION TO EXCHANGE THE

TENGE AT THE PRE-DEVALUATIONEXCHANGE.RATE.  THESE

USD 36 MILLION REPRESENTEDROUGHLY 11 PERCENT OF

THE USD 33O MILLION TOTALHELD BY INDIVIDUALS IN

THE LOCAL BANKINGSYSTEM.   (NOTE:  BECAUSE OF A

HISTORY OF HIGH INFLATION ANDVOLATILE EXCHANGE

RATES OF THE TENGE,KAZAKHSTANI CITIZENS HOLD

APPROXIMATELY ONE HALF OFTHEIR TOTAL SAVINGS AS

U.S. DOLLAR-DENOMINATEDBANKING DEPOSITS.  AT THE

TIME OF THE APRIL 1999DEVALUATION, USD-

DENOMINATED ACCOUNTS TOTALEDROUGHLY USD 17O-180

MILLION.  END NOTE.)

6.  IN ADDITION TO THE EXCHANGE RATE INCENTIVE

OFFERED BY THE NBK, MOSTCOMMERCIAL BANKS PAID

INTEREST AVERAGING EIGHTPERCENT PER ANNUM ON THE

NINE-MONTH DEPOSITS.

 

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JANUARY 200O:  KAZAKHSTANI DEPOSITORS RECEIVE

COMPENSATION AS PROMISED

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7.  AS SCHEDULED, FROM JANUARY 5 THROUGH JANUARY

15, COMMERCIAL BANKSTRANSFERRED THEIR

PARTICIPATING CLIENTS' TENGETO THE NATIONAL BANK

AND THE NBK EXCHANGED THEMONEY FOR U.S. DOLLARS

AT THE RATE OF 88.3 TENGE PERUSD. AS OF JANUARY

15, 200O, THE MARKET EXCHANGERATE WAS ROUGHLY 139

TENGE PER USD.  THE NBK WAS REQUIRED TO ADD

APPROXIMATELY 5O TENGE TOEACH DOLLAR IT CONVERTED

UNDER THE COMPENSATIONPROGRAM.  THE NBK, WHICH

WAS OBLIGATED TO CONVERT USD36 MILLION WORTH OF

TENGE DEPOSITS, EXPENDEDROUGHLY 1.8 BILLION

TENGE, OR USD 13 MILLION, ONTHE PROGRAM.  THE

DEPOSITORS CAN NOW WITHDRAWTHEIR MONEY IN EITHER

TENGE OR U.S. DOLLARS OR OPENA NEW ACCOUNT WITH

THEIR BANK.