In the summer and autumn of 1993, fewer than a dozen officials worked feverishly in complete secrecy to save Kazakhstan from raging post-Soviet inflation and introduce its first-ever national currency.
In Almaty, the country’s economic capital, Kazakh central bankers last month reminisced with foreign colleagues about those heady days at a conference marking the 10th anniversary of the November 15 1993 introduction of the tenge, which means “money” in Kazakh.
Grigori Marchenko, governor of the National Bank, recalls that 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, president Nursultan Nazarbayev set up a secret committee to oversee the introduction of the tenge. Notes were covertly printed in the UK and shipped to Kazakhstan in June 1993.
“We started with a countdown calendar of 45 days,” he says. But halfway through that calendar, in Moscow, a group 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 rouble zone.
“They even told us they had printed one trillion new roubles for Kazakhstan,” Marchenko recalls. 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% of its trade was with Russia. Caution and habit prevailed.
But another Russian faction, which included Boris Fyodorov, and Yegor Gaidar, were against it, and eventually they prevailed. “By late October it became obvious that we were out,” Marchenko says. “So our group was convened again, and we were told to complete this work as quickly as possible.” The president made an announcement on November 12 and six days later the tenge was Kazakhstan’s only legal currency.
“We had taken the Russians by surprise. They expected us to do this no earlier than mid-December, but they were very helpful. We should give them credit for that,” Marchenko says.
In northern Kazakhstan, which was populated mostly by ethnic Russians, the tenge inspired little trust. While the dollar was the second currency of choice, the new Russian rouble was the third – until the Black Tuesday devaluation of October 1994.
In February 1994, Kazakhstan embarked on its biggest post-independence mistake – a so-called clearing exercise. The theory was that with companies owing debts to each other and taxes to the government, they lacked working capital. Some people thought that if the government could lend them money, they would pay their debts and their taxes and start working again, creating a virtuous circle.
But when the move was carried out, against strenuous objections from the central bank, “the opposite happened”, Marchenko says. Companies used the loans to buy dollars, not pay their debts. First the tenge crashed, losing three-quarters of its value in a month. Then inflation soared to 46 % a month.
“We had had no external shock, it was purely something of our making, it was very embarrassing,” Marchenko says. “It had been done elsewhere on a smaller scale, but never on such a large one.” After that “people realized you shouldn’t mess with monetary policy and the president has always been very supportive of the bank. In March 1995, the parliament passed a new law on the central bank, modelled after the 1957 (West German) Bundesbank law, and that’s when our independence was sealed,” he says.
By the time the Russian financial crisis of 1998 rolled in, Kazakhstan was better prepared; the tenge lost only half its value in over a year. Part of the central bank’s ability to resist the parliament, the industrialists or the government grew from the very consistency of its policies. And that, Marchenko says, stemmed from the team assembled by a Soviet-era economist named Daulet Sembayev.
“In the first years of independence, nobody knew how the reforms should be done,” the diminutive, gravel-voiced Sembayev says. So when Nazarbayev appointed him to head the central bank at the introduction of the tenge, Sembayev, then nearly 59, turned to a group of 30-year-olds educated in Moscow and known as the moskvitchi. “We became something of an incubator,” he says.
He made the group members his deputies and assistants and in succession they replaced him as governor when he left in 1995. They were Uraz Jandosov, who became governor at 36, Kadyrzhan Damitov, and Marchenko, the longest-serving of the four, who last year was named Central Bank Governor of the Year by Euromoney.
The governors have changed, but the overall direction and the middle management has been very stable.
“In some ministries, when the minister comes in, he fires almost everyone in the middle level, he brings in his new team, complete with secretaries and sometimes with relatives, and he changes the furniture.” Here, Marchenko says, waving at his desk and the polished conference table next to it, “we still have the furniture ordered by Sembayev.
