ADB approves 1billion loan to Kazakhstan as tenge plummets

(MENAFN- Arab News) ASTANA: The Asian Development Bank (ADB) said Friday it had approved a $1 billion loan for energy-rich Kazakhstan after the Central Asian country's currency lost a quarter of its value against the dollar Thursday spreading panic throughout the region.
Kazakhstan's currency the tenge fell a record 23 percent on Thursday following the country's switch from a costly currency corridor with the dollar to a free-floating exchange rate as the country battles to cope with lower oil prices.
"This loan from ADB's Countercyclical Support Facility will give the country the fiscal leeway it needs to mitigate the unanticipated and significant negative impacts of the steep decline in world oil prices and the economic slowdown of the neighboring countries" said Lotte Schou-Zibell principal economist in ADB's Central and West Asia department.
Kazakh President Nursultan Nazarbayev said Thursday the switch to the free-floating exchange rate was a "necessary step" given gloomy medium-term forecasts for oil prices and exporters' demands for a more competitive exchange rate.
The damage to the tenge which is currently trading at 252.47 to the dollar has sent ripples through ex-Soviet Central Asia a region threatened by depressed global hydrocarbon prices and economic chaos in Russia.
In economically fragile Kyrgyzstan and Tajikistan for which Kazakhstan is a key trade partner dollars were being sold at five to six percent above their respective official rates on Friday.
Turkmenistan the region's leading exporter of natural gas also faces trying economic times.
The reclusive country which devalued its manat currency by a fifth at the beginning of the year depends on oil and gas for 90 percent of its exports.
The Kazakh currency's fall took place on the same day the Russian ruble slipped to a rate of 75 to the euro for the first time in six months renewing pessimism about any recovery in the country whose economic health is vital to Central Asia.
The region's medium-term economic outlook was further complicated by currency devaluations earlier this month by China its largest trade partner.