Kazakhstan's national currency, the tenge, has lost 26 percent of its value against the U.S. dollar within hours of a government announcement that it would abandon its currency-band exchange-rate system to implement a free-floating exchange rate.
Prime Minister Karim Masimov announced on August 20 that the Kazakh National Bank and government were immediately implementing the new monetary policy.
The tenge, which was trading at 188 per U.S. dollar at the start of the day, plummeted to 255 per U.S. dollar by the close of trading on August 20.
President Nursultan Nazarbayev was quoted as saying that it had been "a forced measure, but we did not have any alternative."
The decision comes amid a bleak price outlook for oil, which accounts for half of Kazakhstan's exports. On April 19, the price for benchmark Brent crude oil fell to $47.22 per barrel. The U.S. Energy Information Administration said last week it expects prices to average less than $60 per barrel throughout 2016.
Nazarbaev reportedly said on August 19 that his country's economic policies must be "oriented to the new realities and be ready for oil prices of $30 to $40 per barrel."
Kazakhstan, the second-largest post-Soviet oil producer after Russia and a significant exporter of metals, saw its exports drop 40 percent between January and July due to low global oil and commodities prices.
The Kazakh economy has also been hit by devaluation and depreciation in the currencies of some of its major trading partners, notably Russia and China. Russia's ruble continued to fall on August 19, reaching its lowest value in six months at more than 66 rubles to the dollar. Beijing last week devalued its renminbi, raising fears of a slowdown of the Chinese economy.
Nazabaev warned that his country faces a period of belt-tightening.
"In the past years, we have built a lot, increased staffing and salaries," he told a government meeting in Astana. "Now, however, there is a lack of funds, and in connection with this there will be strict limitations on new projects."
The devaluation of the tenge is likely to cut into the buying power of ordinary Kazakhs, particularly for imports. When Kazakhstan last devalued the currency by 19 percent in February 2014 over low oil prices, the move sent food prices soaring.
"I'm afraid that chaos will start now," an Almaty resident told RFE/RL's Kazakh Service after the move was announced. "I think controls should be kept. Banks and exchange offices could find their own solutions."
Another, a business owner, also in Almaty, called it a "shocking moment."
"We take our salary in tenges, so I have no idea what I will do," she said.
But the fall in the tenge's value could have two positive longer-range effects.
It could help reduce the price of Kazakhstan's metal exports in response to Beijing's devaluation of the renminbi, which is helping Chinese metal exporters undercut the prices of their competitors on the global market.
And, within Kazakhstan, it could help raise the cost of low-cost Russian imports that have flooded the market since the Russian ruble's drop, undercutting domestic producers of food and consumer goods.
Lars Christensen, an international economist and head of Copenhagen-based Market and Money Advisory, says Astana had already been moving gradually toward a free-floating currency with earlier devaluations of its tenge. But China's move last week may have convinced the Kazakhs to hasten the move.
"The international norm is really one of floating exchange rates. The Chinese are moving toward a more floating exchange rate, the Vietnamese are certainly doing that as well, and given the Chinese moves and also what we have been seeing with the [stronger U.S.] dollar and commodity prices, this forces the hands, particularly of commodity exporting countries."
He says the question now is whether, after years of intervening to adjust the value of the tenge, Kazakhstan's central bank can give up old habits and let the market truly set the currency's course.
"I hope the Kazakh central bank will be more committed than the Russians have been because it is really only doing damage to try to keep an artificially strong currency when you are a commodity exporter and commodity prices are dropping like we are seeing now," he says.
Russia undertook its own planned float of the ruble last year. But in November and December, the Russian Central Bank intervened to prop up the ruble as it lost value sharply on plunging oil prices.
The Kazakh devaluation comes as several other currencies in the post-Soviet region have also seen their currencies drop against the dollar in recent months, including Belarus's ruble and Georgia's lari. Many of Russia's regional trading partners have suffered with the ruble's collapse amid low oil prices and Western sanctions over Ukraine.
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With reporting by RFE/RL's Kazakh Service, Reuters, AFP and Interfax