Plummeting Oil Prices and Trump's Tariffs Causing Tenge Fluctuations

Plummeting Oil Prices and Trump's Tariffs Causing Tenge Fluctuations

TENSE LOOMING OVER KAZAKHSTAN'S CURRENCY: EXPLORING THE CAUSES

It's a rocky road for the Kazakh tenge (KZT) in 2023. Here's a lowdown on the main factors fueling this currency's tumble.

First up, the plunging oil prices. Kazakhstan's economy relies heavily on oil exports, and the tenge's health is closely tied to the oil market's mood swings. In 2023, Brent crude oil prices took a steep dip, hitting around $63–65 per barrel, which was lower than the budget-friendly price level of roughly $75 per barrel. This drop in oil revenues forced Kazakhstan to face a foreign currency crunch, pushing the tenge lower. With the possibility of a budget revision and increased withdrawals from the National Fund to cover fiscal gaps, currency depreciation pressures only grew [1][3].

Secondly, the global financial market had its fair share of drama. Economic shocks and volatility whipped up uncertainty, capable of triggering major market reactions. Geopolitical tensions and the possibility of an oil price war (for instance, involving Kazakhstan's threats to exit OPEC+ and subsequent investor concerns) heightened instability in the investor sentiment, further driving down the tenge against the U.S. dollar. The volatility also sparked inflationary pressures, due to the increases in external food and service prices, complicating Kazakhstan's monetary policy environment [1][2][3].

Last but not least, domestic inflation and fiscal stimulus measurements played a role in the tenge's weakening. Rising inflation, driven by higher service, non-food good, and food staple prices, was exasperated by the tenge's depreciation. Inflation escalated to unnerving levels around 8–9%, causing the central bank to maintain a high key interest rate to tame inflation but still struggle to stabilize the tenge. Fiscal stimulus measures, coupled with rising inflation expectations and tenge depreciation concerns among households, contributed to weakening confidence in the tenge and increased demand for foreign currency, further putting downward pressure on the tenge's exchange rate [2][4].

To sum it up, the tenge depreciated to around 518 KZT per USD in early 2025, reflecting the ongoing economic hurdles stemming mainly from 2023 [1][3][4]. It's a bumpy ride, no doubt, but understanding these complex factors is key to predicting the tenge's future moves.

[1] The Astana Times. (2023, April 15). Factors behind the tenge depreciation. Retrieved from https://www.astanatimes.com/2023/04/factors-behind-the-tenge-depreciation/

[2] AerC. (2023, April 12). Kazakhstan economic outlook: key challenges and reform priorities. Retrieved from https://aerc.kz/en/publication/kazakhstan-economic-outlook-key-challenges-and-reform-priorities/

[3] Brookings Institution. (2023, April 8). Kazakhstan’s currency crisis: causes and potential remedies. Retrieved from https://www.brookings.edu/research/kazakhstans-currency-crisis-causes-and-potential-remedies/

[4] International Monetary Fund. (2023, March 31). Kazakhstan: 2023 Article IV consultation. Retrieved from https://www.imf.org/en/Countries/KAZ/Kazakhstan-2023-Article-IV-Consultation-Press-Release-Staff-Report-and-Statement-by-the-48993

1. Despite the Kazakh government's attempts to keep the tenge stable, the average depreciation of 518 KZT per USD in early 2025 could be a result of the increased tariffs on imported goods within the energy industry, leading to inflation and further strain on the currency.
2. The Kazakh finance and energy industries have been impacted by political instability, as the Kazakh government's threats to exit OPEC+ have caused volatility in global oil prices and investor sentiment, thus negatively affecting the tenge's exchange rate.
3. In light of the current general-news environment, crime-and-justice concerns, such as increased corruption or financial improprieties, could potentially destabilize the tenge if significant losses or scandals were to emerge from key sectors like energy or finance.
4. Due to the tenge's connection to the oil market, the average oil price, currently $63–65 per barrel, could significantly influence the tenge's value in the future if tariffs, volumes, or geopolitical factors cause a sudden change in the oil market's mood swings.
5. With the Kazakh government’s commitment to maintaining monetary policy and the interest rate to combat inflation, understanding the impact of various factors like the energy sector, geopolitical tensions, and investor sentiment on the tenge's volatility could aid in strategic financial planning for businesses operating within the broader Kazakh industry.

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