Land of Borat

I probably should not confess to enjoying Borat (full title: Borat: Cultural Learnings of America for Make Benefit Glorious Nation of Kazakhstan), 86 minutes of low-brow, sophomoric gags lest I shatter my highly refined, cultured and sophisticated image. So I’ll never admit (in writing) to laughing almost non-stop. It’s the story of a reporter from Kazakhstan traveling across America to discover what makes the country great. I don’t know how the 17 million people of Kazakhstan feel about being portrayed by an imbecile, but Sacha Baron Cohen does a pretty good job of pointing out the fatuousness of Americans.

All this is in way of introduction to what I know about Kazakhstan, most of which comes from that movie. In other words, pretty close to nothing. But while global stock markets fell 1-2% today, the good people of Kazakhstan saw their currency, the tenge, drop 22%, on top of a 4% decline yesterday as the National Bank of Kazakhstan (known widely as the NBK) allowed the tenge to float.

Most (73% to be precise) of Kazakhstan’s exports is oil, whose price, you may have noticed, has been under some pressure. As a consequence, exports are off 34% this year, pushing its current account balance into a deficit. Compounding the problem of a plunging oil price, Kazakhstan’s main trading partner, Russia (one-third of its trade), has seen the ruble fall 47% against the US$ in the past year. And its second-largest trade partner, China (18% of trade), devalued 2% last week. So the combination of a 60% drop in the price of its main export and lost competitiveness against its main trading partner has put the tenge under tremendous pressure. So today, the NBK threw in the towel and allowed the currency to plummet.

We shouldn’t make too much of the travails of a small country (its GDP is on par with Detroit’s). But I don’t think it should be entirely ignored either. I see it as indicative of the strains in the global economic balance as countries try to fight off the forces of weak growth with monetary easing and currency devaluation. And although small, the people of Kazakhstan have a great deal of pride, as Borat said:”Kazakhstan is the greatest country in the world, all other countries are run by little girls.”