Almas Chukin, a renowned economist, seeks to dispel the myth that the National Bank fuels inflation in the country by operating a money-printing machine.

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It is often heard that the cause of inflation lies in the actions of the National Bank, which allegedly «prints» money. In reality, the National Bank does not increase but, on the contrary, reduces the amount of money in the economy. This is done through the sale of notes and attracting deposits from commercial banks. Banks purchase NB’s debt securities, place «free» funds in deposits at high interest, and thus, this money exits the economy and settles on the NB’s balance sheet. These measures come at a considerable cost to the country’s central bank, with approximately 4.25 trillion tenge currently held by the NB.

For reference: the country’s GDP is slightly over 100 trillion, so the NB’s accounts hold roughly an amount equal to 4% of it, or every 25th tenge. The NB pays about 15% annually on this amount, or around 640 billion (1.4 billion USD) daily. Another figure for comparison:

the annual transfer from the National Fund to the budget for the next 3 years has been approved at 2 trillion.

The primary driver of inflation in our country is the credit channel. When banks actively issue loans, it increases the money supply in circulation and, consequently, contributes to inflation growth. Subsidizing loan rates helps boost the activity of this process. This process is clearly visible on the chart. Consumer loans are growing at a rate of 28%, and business loans at 15%.

Equally important is the fiscal channel. The government, by increasing its expenses through the National Fund, also contributes to the increase in the amount of money in the economy. State budget expenditures increased by 24%, and revenues by 15%. This, in turn, can also lead to inflation growth.

Overall, «annual growth of the money supply continues to remain high, with October’s growth reaching 22.1% compared to the previous year.» In simple terms, the amount of money is growing significantly faster than the economy (by 5.9%) – money +26.9%, nominal GDP +21%.

Managing inflation is a complex task that requires a balanced approach and coordinated actions from both the National Bank and the government. It is essential to understand that inflation is a multifaceted process, and there is no simple solution.

To achieve economic stability and control over inflation, a deep understanding of these processes and a measured application of economic tools are necessary. Discussing and realizing these factors are the first steps towards effective inflation management in our country.

Several slides summarizing the results of the latest meeting and the published report of the NB on monetary policy are provided below. I can add that two consecutive rate cuts are likely the maximum possible for the next six months. Inflation is decreasing, and the real rate – the difference between the NB rate and the inflation level – is approximately 15 and about 11 – approaching the 3-4% corridor, which is considered textbook correct for money. But don’t forget the fluidity and global nature of money. If the tenge becomes less profitable compared to other currencies, money will flow into other currencies.»