Kazakhstan escapes raging ruble

ALMATY, Kazakhstan — In the summer and fall of 1993, fewer than a dozen officials worked feverishly in complete secrecy to save Kazakhstan from raging post-Soviet inflation and create its first-ever national currency.

Then, they decided to accept Russia’s offer to join the new Russian ruble, and changed direction again when Moscow withdrew the offer.

In Almaty, the country’s economic capital, Kazakh central bankers reminisced last month with foreign colleagues about those heady days at a conference marking the 10th anniversary of introduction of the monetary unit the tenge, which means “money” in Kazakh.

Kazakhstan is now a model of financial and monetary stability, with a financial system considered more advanced and transparent than Russia’s.

Over the past four years, it has enjoyed an average annual growth rate of 10.5 percent, the world’s highest after Equatorial Guinea, which is also in the midst of an oil boom. But unlike the tiny African nation, oil accounts for only one-fifth of Kazakhstan’s GDP growth, with the financial sector growing at a rate of 50 percent a year.

Horst Kohler, managing director of the International Monetary Fund, praised Kazakhstan’s “sound monetary policy” and “robust growth.”

In a long interview in his office after the conference, Grigori Marchenko, governor of the National Bank, Kazakhstan’s central bank, recalled that in 1993 this country was still part of the Soviet ruble zone and reeling from an inflation rate of more than 2,000 percent for the second year in a row.

“The Russian economy was going downhill and so was ours,” he said.

Things were so bad that “We had crisis committees, and their job was not to get the economy to grow, but to slow the decline.”

In Almaty — then still the national capital before the government was relocated to Astana in 1998 — President Nursultan Nazarbayev created a secret committee to oversee introduction of the tenge. The currency was covertly printed in Britain and shipped to Kazakhstan in June 1993.

“We started with a countdown calendar of 45 days,” Mr. Marchenko said. But halfway through that period, a group in Moscow led by President Boris Yeltsin and including Prime Minister Viktor Chernomyrdin and central bank governor Viktor Geraschenko offered to include Kazakhstan and three other former Soviet republics in a new Russian-ruble zone.

“They even told us they had printed 1 trillion new rubles for Kazakhstan,” Mr. Marchenko recalled.

In September, the Almaty working group convened, accepted the offer and dissolved. After all, unlike the Baltic countries, Kazakhstan had never had its own currency and 70 percent of its trade was with Russia. Caution and habit prevailed.

But another Russian faction — which included Boris Fyodorov, Alexander Shokhin and Yegor Gaidar — were against it, and eventually they prevailed.

Story Continues →