ALMATY (Reuters) – The International Monetary Fund urged Kazakhstan on Monday to hike interest rates and said fiscal consolidation plans could also help curb runaway inflation in the oil-rich Central Asian nation.
Kazakhstan’s annual inflation surged to a 14-year high of 17.7% in September against the background of growing government spending, supply chain disruptions and the depreciation of the local tenge currency against the Russian rouble.
But Kazakhstan’s central bank kept its policy rate unchanged at 14.5% at a meeting early last month, saying that inflation was largely driven by external factors and required no further monetary tightening.
“Further monetary policy tightening is needed to preserve macroeconomic stability and protect the most vulnerable,” the fund’s mission said in a statement after visiting the former Soviet republic.
“A higher policy rate is necessary to anchor inflation expectations, bolster the credibility of monetary policy, and reduce the risk of adverse second-round effects arising from wage or exchange rate depreciation pressures.”
Fiscal consolidation, the fund said, should contribute to containing inflation while preserving priority social spending.
Kazakhstan’s central bank is set to review its monetary policy on Oct.26.
(Reporting by Olzhas Auyezov, Editing by William Maclean)
