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Source: www.asiaecon.org |

KAZAKHSTAN SUGGESTS A NEW CURRENCY


On Wednesday, Kazakh President Nursultan Nazarbayev proposed a common currency for the five former Soviet republics, Kazakhstan, Kyrgyzstan, Tajikistan, Belarus and Russia, also known loosely as the Eurasian Economic Community (EEC). Although Russia has made no official comment, the nation should not be pleased with the news, as it has been promoting the ruble for the same role for years.



On Wednesday, Kazakh President Nursultan Nazarbayev proposed a common currency for the five former Soviet republics, Kazakhstan, Kyrgyzstan, Tajikistan, Belarus and Russia, also known loosely as the Eurasian Economic Community (EEC). Although Russia has made no official comment, the nation should not be pleased with the news, as it has been promoting the ruble for the same role for years.

The plan is to create a common non-cash currency, named the yevraz, to insulate themselves from the global economic crisis’s impacts. Yevraz is the newly coined word that sounds close to “Eurasia” in Russian. President Nazarbayev blames the dollar for the majority of Kazakhstan and the regions economics woes.“Its exchange rate shouldn’t depend on the fluctuations of the world currencies….The flaws of the existing global currency system lie at the heart of the current global crisis,” Nazarbayev said in a speech to an economic forum in the Kazakh capital, Astana.

Lately, Kazakhstan has enjoyed strong economic success, mainly because of its vast oil and gas resources, growing at a rate of over 9 percent in the first half of the 21st century. Today, Kazakhstan is considered by many to be the dominate state in Central Asia. But with the recent plummet in energy prices and credit crisis, President Nazarbayev has blamed the world’s reliance on the dollar as the source of the crisis. Kazakhstan is facing its first budget deficit in recent years because of a drop in commodity prices. It devalued its national currency, the tenge, by 18 percent last month.

The move marks an unprecedented change in foreign policy as the country has maintained very diplomatic and cautious relations between Russia and the United States. By suggesting a new currency instead of the ruble as the region’s currency and by blaming the dollar for the the economic crisis, Kazakhstan may perhaps alienate itself from both Russia and the United States. 

Reasons against using the ruble were reiterated by Zhamilya Bopiyeva, vice president of the Institute of Economic Research with the Kazakh Economic and Budget Planning Ministry. “Using the non-cash currency would mean more stability to the Eurasian Economic Community because the ruble is influenced by Russia’s domestic policies and oil prices.”

Bopiyeva brushed off any comparisons between the yevraz and the euro, saying the euro-zone countries are more politically and economically integrated than the Eurasian Economic Community.

The yevraz is only planned as a stepping stone for Kazakhstan’s plan to create a singular world currency within the next 10 to 20 years. Nazarbayev said the yevraz could be a step towards a common global reserve currency that would operate under the auspices of the United Nations. The Group of 20 (G-20) meeting in London on April 2, 2009 should discuss such a global currency, he said.

The idea of creating a single international currency is not new. In the 1940s, British economist John Maynard Keynes advocated creating a world central bank charged in part with issuing a monetary unit called the “bancor.” U.S. President Franklin Roosevelt’s administration also forwarded its own variant on the idea called the “unitas.”

Nazarbayev’s proposal has been immediately dismissed by many, but the idea was embraced by Robert Mundell, who won the Nobel prize in economics in 1999 for helping lay the theoretical framework for Europe’s single currency. “It would be a very good idea if the G-20 took that idea up in London,” Mundell said.

Source: www.AsiaEcon.org
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Source: www.asiaecon.org |


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