The economies of all five Central Asian countries (Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan) are suffering from the impact of falling commodity prices.
In 2015 Kazakhstan, in order to save its foreign reserves, abandoned currency peg and let the Tenge float freely which resulted in a significant devaluation. The Kyrgyz currency has also been significantly devalued.
Tajikistan and Turkmenistan devalued their currencies in 2015 too but continue to operate pegs at lower levels. However, these countries were forced to limit foreign exchange operations, banning bureaux de change outside bank branches (the former had, before the ban, by far outnumbered the latter in both countries, where banknote cash was king). As a result, unofficial exchange offices appeared and a currency black market now flourishes in both countries.
To date, no changes in Uzbekistan’s FX policy have been officially introduced. The country’s central bank continues to use an exchange rate for local currency which clearly does not reflect the market situation. The exchange rate for the Uzbek currency on the local black market was in a downward spiral throughout 2015.
So far, the devaluation, and ensuing rise in inflation, have not resulted in political crises in any of the Central Asian countries. None of the governments, except Kazakhstan’s, have announced any significant economic reforms.
The government of Kazakhstan, where living standards are significantly higher than in its southern neighbours, is genuinely concerned about the general economic situation and its ability to fulfil its social obligations. Last year it announced a major privatisation programme for 2016. The government plans to sell stakes in almost all major national companies, including KazMunayGas, the largest oil and gas company, and Kazakhstan Temir Zholy, the railway operator.
The Kazakh privatisation programme, as well as the upcoming parliamentary elections, will form two major points of interest in 2016 in the entire region. However, the unresolved issue of political succession in Kazakhstan (where Nursultan Nazarbayev will turn 76 years old this year) and Uzbekistan (where Islam Karimov will be 78) might lead to sudden destabilisation.