NBK to sell dollars gradually under new mirroring mechanism
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The National Bank of Kazakhstan (NBK) announced on July 1 a new 'mirroring' mechanism for selling foreign currency from the National Fund on the exchange. Instead of lump-sum sales tied to budget transfers, the NBK will now sell the currency evenly over six months. The change aims to reduce volatility and make operations more predictable for the market.
The Mechanism Change
The NBK altered the procedure for transferring guaranteed transfers from the National Fund to the republican budget. Starting in June, transfers will be made unevenly based on actual budget needs, revenues, and expenditures. Under the new mechanism, the NBK will first acquire foreign currency from the National Fund in exchange for newly issued tenge, then sell it evenly on the market over the following six months. Previously, currency was sold directly on the exchange in lump sums matching the transfer schedule.
Market Impact
The change is designed to smooth the influence of budget operations on the foreign exchange market, according to Ramazan Dosov, chief analyst at the Association of Financiers of Kazakhstan (AFK). Instead of large Ministry of Finance orders immediately affecting sales volumes and exchange rate dynamics, the NBK will gradually release currency, avoiding sharp fluctuations in supply. Dosov noted that this makes operations more predictable for market participants.
What's Next
The NBK will implement the new mechanism over the coming months, with the first sales expected to begin shortly. It remains unclear how effectively the central bank can balance the timing of sales against fluctuating budget needs and market conditions.
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NBK to sell dollars gradually under new mirroring mechanism
