COVID-19 Kazakhstan Response: Currency Regulation Changes

Due to the current unstable situation in the world financial and local currency markets due to the coronavirus (COVID-19) pandemic, the National Bank of Kazakhstan has started changing currency control regulations. This LawFlash provides a summary of the current changes.

The National Bank of Kazakhstan (NBK) management board on 19 March approved Resolution No. 25 regarding changes to NBK Management Board Resolution No. 40 of 30 March 2019 on Approval of Rules for Performing Currency Operations in Kazakhstan (Currency Operations Rules) that came into effect on 23 March—the day when Resolution No. 25 was published in the Electronic Control Hub for Kazakhstan Normative Legal Acts.

In accordance with NBK’s Information Notice of 24 March, posted at NBK’s official website, the Currency Operations Rules were changed to restrict unreasonable speculative demand for non-cash foreign currency, and to protect the rights and interests of citizens, society, and the state.

Summary of Changes

The changes are as follows:

• Within a single banking day, a legal entity may not buy more than the equivalent of $50,000 (previous threshold was $100,000) of non-cash foreign currency for purposes not related to the performance of foreign currency obligations. Such purposes include the transfer of foreign currency to owned account in foreign banks, unrequited foreign currency transfer, or putting money into an account with a Kazakhstan bank.
• It is possible to buy more than the equivalent of $50,000 of non-cash foreign currency only for performance of a currency agreement. It is worth noting that the definition of “currency agreement” includes not only contracts and their amendments and additions, but also foundation documents (charter and foundation agreement) and other documents that are the basis and/or reason for a currency operation, including their amendments and additions.
• To complete such a purchase, it is necessary to file an application with a servicing bank, while attaching a currency agreement that has a marked registration number on it (if applicable), an invoice or another payment document that is a basis for buying foreign currency, or a copy of a registration or notification certificate (if applicable).
• If the purchased non-cash foreign currency is not used within 10 business days (most likely from the application date – Resolution No. 25 does not specify this), the applicant’s servicing bank must sell such foreign currency for a national currency within three (most likely, business) days, except for the foreign currency purchased for the applicant’s distribution of the net income (dividends) or a part of it to its shareholders, founders, or participants. To let the servicing bank perform such obligation, the applicant must sign and attach a relevant instruction to the servicing bank to the non-cash foreign currency purchase application.
• It is permitted to use the purchased non-cash foreign currency under another currency agreement, provided that the legal entity submits a new application that complies with the above requirements, in addition to the previous application that was a ground for buying the non-cash foreign currency.
• The servicing bank may reject the application if
  • such application does not comply with the above requirements;
  • the total amount, in accordance with the applications of a legal entity, of the purchases of non-cash foreign currency under a single currency agreement exceeds the value of such currency agreement and invoice or another payment document; or
  • the total amount, in accordance with the applications of a legal entity, of the purchases of non-cash foreign currency by such legal entity through a single servicing bank within a single day for the purposes not related to performance of foreign currency obligations, exceeds the equivalent of $50,000.
• All currency contracts will be performed as usual.
• The above changed requirements do not apply to individuals or non-residents of Kazakhstan.

Finally, we note that according to NBK’s press release No. 12 of 25 March, the Kazakhstan government decided to require mandatory sale of export proceeds at the domestic market by quasi-state entities—companies/exporters having more than 50% state ownership, including companies within the Samruk-Kazyna State Welfare Fund group. This requirement will be in effect during the declared state of emergency in Kazakhstan—until 15 April.

As of the distribution of this LawFlash, the referred government resolution was not published officially. It appears that such resolution was made within the authorities of the Kazakhstan government to establish, in accordance with the joint recommendations of NBK and other relevant state authorities, an ad hoc currency regime of certain restrictions[1] in the case of a serious threat to sustainability of the payment balance, stability of the domestic currency market, or the economic security of Kazakhstan, unless such situation may be resolved through other economic policy measures.

We will continue monitoring for further Kazakhstan currency regulation changes and will update our clients and readers as new information comes to light. A Russian-language version of this LawFlash is available upon request.

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Contacts

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:

Almaty
Aset Shyngyssov