‘The policy of central banks depends on how much the economic structure is isolated, such as the degrees of deregulation of economy, trade, exchange rates, etc. Therefore, there is no unambiguous recipe for the policy the central banks should pursue.’

We talked to Aidarkhan Kusainov, a prominent economist, and former advisor to the chairman of the National Bank of Kazakhstan, about the policies central banks should adhere to in order to curb inflation. He believes this is exactly what causes so many fruitless conversations.

‘We should take the Chinese experience for instance, which has a more dormant monetary policy. The policy of inflation targeting in China is associated with the structure of the economy where the state has a bigger share and the limitations of both the foreign exchange market and the conversion capacity of yuan. What sets the Chinese economy aside is the key role played by major state-controlled corporations in the economy and the central-leading role of the Communist Party in economic ties. These preconditions make it obvious that China leads its own unique monetary policy’, Kusainov explained.

‘However, inflation targeting is the only way to effectively curb inflation in a market economy and free market’, he explicated.

‘The National Bank of Kazakhstan is essentially not pursuing inflation targeting, because inflation is only just accelerating, and the country is trying to fight it through administrative and command methods. It is the same dead-end path when they are trying to regulate prices through administrative and economic measures, such as the raids of akimats, and stabilization funds by the state in the conditions of liberal economy, increased marketability and large-scale pseudo-demonization of the state economy. They are basically trying to control state prices.

This is a perfect example of what I would call a schizophrenic policy. On the one hand, the economy is deregulating, which means that the policy of inflation targeting may become the only way to influence prices. At the same time, we get what we have if the economy is completely liberalized, refusing inflation targeting. Therefore, inflation in Kazakhstan is higher than in it is in Russia and it will continue being on the rise’, Kusainov concluded.

Seymur Mammadov

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