The National Bank is implementing restrictions on the currency spread for the dollar at 7 tenge and for the euro at 10 tenge, as noted by Galim Husaинов, who also shares his thoughts on the potential outcomes of this decision.
The currency exchange spread represents the service fee. The currency exchange market is one of the most competitive markets in the country, with over 2000 exchange offices operating. The increase in spread occurs during periods of high demand for currency, regulating supply and demand. The introduction of these limitations will raise the demand for currency, as if exchange points cannot meet the demand, there are banks that can import currency in unlimited quantities to satisfy any demand. However, this action will only lead to an increase in dollarization and a reduction in competition.
It is essential to understand the root causes behind why exchange offices have started to set high spreads. The primary reason is not speculation but rather that some countries where Kazakh citizens travel have stopped accepting old-style dollars (the so-called white dollars), which has significantly decreased the demand for them. The National Bank prohibits differentiating dollars by their series, so exchange offices are not allowed to refuse to accept such dollars. To limit the purchase of white dollars, exchange offices have started to set high spreads, which is logical in a market economy: if there is no demand for a product, it cannot be bought at a high price, and the price decreases.
Meanwhile, many banks, unlike exchange offices, can impose fees, making them more flexible in dealing with white dollars. For instance, banks have begun to charge fees for accepting white dollars, while exchange offices have increased their spreads. However, if a client brings new-style dollars to an exchange office, they are offered the market rate with a spread of 2–3 tenge.
How to address the issue of white dollars?
- Require second-tier banks (STB) to accept white dollars without fees. STBs can then export such dollars to countries where foreign banks accept them.
- Centralized involvement of the National Bank. The National Bank can centrally purchase white dollars from exchange offices and STBs and then export them abroad.
- Diplomatic efforts. The National Bank can negotiate with the central banks of countries that have restrictions on the use of old-style dollars to ease or lift these restrictions.
Issues with the current approach
The current solution does not eliminate the root problem and only intensifies restrictions for people holding old dollars. Instead, it is necessary to focus on addressing the reasons that lead exchange offices to set high spreads. Otherwise, this will result in:
- further growth of dollarization;
- strengthening the positions of banks at the expense of limiting the operations of exchange offices;
- a lack of long-term solutions to the problem.
To stabilize the currency market and reduce social tension, it is crucial to eliminate the root causes of the issues related to white dollars. This requires a comprehensive approach, including commitments for STBs, involvement of the National Bank, and international cooperation. Only such measures will effectively solve the problem while maintaining the competitiveness of the exchange market and the interests of citizens.