Kazakhstan is looking at hedging the price of oil, in a sign of how the US shale revolution and recent tumble in crude prices are forcing energy-dependent governments to rewrite their economic plans.
Kairat Kelimbetov, governor of Kazakhstan’s central bank, said the country’s finance ministry had recently held discussions with Goldman Sachs to explore the possibility of oil hedging, although he added there was not yet agreement whether to go ahead with the programme.
Kazakhstan is the world’s 18th largest oil producer and relies on oil for half of government revenues and two-thirds of exports. The government last month said it would revise future budget plans to take account of lower oil prices as well as slower growth in neighbouring Russia and China.
In a wide-ranging interview in Kazakhstan’s financial capital, Almaty, Mr Kelimbetov said the fall in oil prices had been “a wake-up call” for the country.
The Kazakh government has this year launched a string of reforms in an attempt to woo western investors, and Mr Kelimbetov said it was now preparing a stimulus programme. “Next month the government will be ready to announce some countercyclical fiscal policy, with big plans in infrastructure,” he said.
If it went ahead and hedged oil, Kazakhstan would be following the example of Mexico, which each year spends hundreds of millions of dollars on derivatives to protect itself against a sharp fall in oil prices in the world’s largest commodity hedging programme.
“We studied the Mexican experience with Goldman Sachs,” Mr Kelimbetov said. “From the commercial point of view it seems very attractive.”
However, he added the discussions were still at “very early stages”, and that it remained “quite controversial” within the Kazakh government.
The fall in oil prices and tumble in the value of the rouble has heaped pressure on the central bank and raised speculation it may be forced to devalue Kazakhstan’s currency for the second time this year. Mr Kelimbetov said he believed the recent moves in the rouble were “not really rational” and predicted the Russian currency would recover to 38-40 roubles per dollar next year from a record low of 48.5 on Friday.
But he conceded that if the rouble remained at current levels, then Kazakhstan may be forced to follow the Russian central bank’s move to remove support from its currency and allow it to float freely sooner than planned.
“If it will be $80 [oil] and 38-42 [roubles per dollar] then it’s quite OK for us: if not, then I think [ . . . ] we will move faster to inflation targeting,” he said.
Kazakhstan’s central bank has kept the tenge in a tight range against the dollar since a 19 per cent devaluation in February, meaning that the Kazakh currency is now trading at a five-year high relative to the rouble.
Senior Kazakh bankers told the FT that the central bank had been discussing various types of capital control, such as forcing companies to repatriate export earnings, as an alternative to devaluation.
But Mr Kelimbetov insisted that there were “not any stupid ideas about currency controls”.
“This is back in the USSR,” he said. “There was a small discussion in Russia [on the subject of capital controls] between [presidential adviser] Glazyev and the central bank.”
“The banks asked us; we explained to them. [But] I strongly believe, when people know they could at any time get their money in whatever currency they will believe in the system.”
Source: Financial Times
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