Tenge's fall not to affect price of imported grain

/By AzerNews/

By Aynur Karimova

A drop in Kazakhstan's national currency, the tenge, will not affect the cost of its grain imports to Azerbaijan, Murtuzali Hajiyev believes.

The head of the press service of Azerbaijan's Agriculture Ministry told Trend on August 20 that this is a result of the increase in grain production in Azerbaijan.

Each year grain production increases in Azerbaijan and the government is keen on further minimizing dependence on foreign suppliers.

“In 2015, Azerbaijan produced 2.8 million metric tons of grain crops,” Hajiyev said. “Some 1.687 million metric tons of grain was produced, and the yield amounted to 31 quintals per hectare, which is 8 quintals more than in the same period of 2014. Azerbaijan has enough grain, and that means we are not so dependent as before.”

On August 20, Kazakh Prime Minister Karim Massimov announced that Kazakhstan had launched a new monetary policy based on a free-floating tenge rate and canceled the currency corridor. The weighted average rate of tenge fell to 255.26 tenge per dollar from 188.38 tenge on August 19 on the Kazakhstan Stock Exchange for the first trades after the announcement.

Economists also share the opinion of the agriculture ministry's official. Economist Ogtay Hagverdiyev told Trend that the depreciation of the tenge rate will not greatly affect Azerbaijan.

"Azerbaijan has its own monetary policy and the country’s central bank adjusts the exchange rate of manat,” he said. “Therefore, the depreciation of the tenge rate will not affect Azerbaijan."

The expert said that the depreciation of the national currency rate of one country affects another only in the case of extensive trade relations between them.

"The trade with the CIS countries is about 22 percent of the total foreign trade turnover of Azerbaijan,” he said. “Kazakhstan’s share in the total foreign trade turnover is only 1.06 percent. Therefore, it is not worth expecting any harmful impact of the depreciation of the tenge rate on Azerbaijan."

The tenge’s depreciation will not cause a strong growth in grain prices as it is set not by Kazakhstan, but by the international demand for grain.

“Thus, grain prices rise in some countries only if they rise on the world grain market. At the same time, in case of an increase in grain prices, the Cabinet of Ministers decides to exempt the imported grain from VAT, which allows for regulating prices and preventing the rising cost of grain. It should also be noted that Azerbaijan imports about 300,000 metric tons of grain from Kazakhstan, while the total amount of grain imported in the country is about 1 million metric tons a year," the expert noted.

Economist Farhad Amirbayov, in turn, said that the foreign trade of Azerbaijan is framed in such a way whereby prices in contracts are fixed in foreign currencies, allowing neither of the parties to undertake currency risks.

“There cannot be any changes in the prices for grain, as the prices in the foreign trade contracts of Azerbaijan are set in the currencies of third countries, usually in U.S. dollars,” he noted. “Therefore, the change in the tenge rate will not affect the price for grain exported to Azerbaijan.”