Dedollarization and the Cap on Foreign-Currency Deposit Rates

At one point, with the aim of dedollarizing the assets of second-tier banks, the National Bank introduced a 1% cap on dollar deposit rates. This made tenge assets more attractive and, to some extent, helped shift part of foreign-currency savings into tenge. However, whether such a measure benefits the country as a whole is a debatable question that calls for deeper analysis.

As we know, development is impossible without investment, regardless of the currency in which it enters the country. That is why it is vital for any economy to keep as much money as possible at home. Through various channels — banks, investment and brokerage companies — these funds can work for the economy and generate additional income. One problem cannot be solved while ignoring the impact of the decision on other segments of the economy. What is needed is a systemic approach that assesses the aggregate effect.

Until 2022, with the 1% cap in place, we did not see any great negative impact on the economy: international rates were close to zero, so the cap did not give rise to arbitrage, while it did a good job of restraining speculation by second-tier banks. However, as interest rates rose around the world, including in the United States, foreign assets became far more attractive than second-tier banks' foreign-currency deposits. As a result, the idle funds of the country's economic agents began moving toward the purchase of foreign assets.

Unfortunately, the National Bank's statistics do not give a full picture of the scale of private-sector capital outflow, but some figures speak for themselves. Under the "portfolio investment" item, annual growth is clearly visible: in 2022, USD 2.4 billion was moved abroad, while in 2024 the figure was already USD 6.1 billion. Over three years the total came to USD 12.6 billion, or about KZT 6.5 trillion. For comparison, all foreign-currency deposits in second-tier banks amount to roughly KZT 9 trillion.

Non-residents are also withdrawing capital from the country: under the same "portfolio investment" item, USD 1.9 billion was withdrawn over three years. According to preliminary data, the outflow in the first quarter of 2025 alone was USD 3.2 billion. And looking at other sectors of the economy (excluding banks and the government), net acquisition of foreign financial assets came to USD 5.6 billion. For comparison, for the whole of 2024 it was USD 3.9 billion.

If we look at foreign-currency deposits in second-tier banks overall, we can see that they are not actually declining and stand at KZT 8–9 trillion. If we add the private sector's foreign-currency assets held abroad, the total will be several times larger.

Looking at tenge deposits, we can see that deposit growth is roughly equal to the base rate. This indicates that the tenge money supply is growing not through the conversion of dollar deposits into tenge, but through interest accrued on deposits.

When a country lacks investment, foreign-currency funds flowing abroad could instead serve as a good alternative for smoothing the balance-of-payments deficit.

I believe the large banks already see this on their balance sheets, as many VIP clients are increasingly buying foreign securities as an alternative through brokerage companies. To prevent their balance sheets from shrinking, Halyk Bank, for example, has for the second year in a row been offering its VIP clients 3.5% on its foreign-currency bonds, which have all the features of a savings deposit.

The foreign-currency arbitrage created by the 1% cap on foreign-currency deposits benefits only the banks, which then re-lend the funds at 4–5%. Money earned in the country goes on to work not for the country but for other countries (the US, Europe, the UAE, Turkey and so on). Meanwhile, the root of the problem lies in devaluation risks, and it should be resolved not at the expense of those who own the money, but at the expense of those who subsequently use it to generate entrepreneurial income.