The 2014 Devaluation: Who Will Suffer and Why Reforms Are Unavoidable

Our hysteria knows no bounds. As on a sinking ship, only calm and reason can save a person. Panic, fear and rash actions lead to disaster.

From an economic standpoint, the devaluation will help the economy in the short term. Natural monopolies and plain monopolists will suffer. The next question is what to do about inflation, and how to keep it in check when we depend so heavily on imported goods, works and services.

First, monopolists and natural monopolies will suffer.

Second, KazMunayGas and the Ministry of Oil and Gas are in for a very hard time. They have not expanded their refineries or built a new one, the oil price is not falling, and neighboring Russia keeps raising its prices again and again. Yet fuel is a socially sensitive product. They will hold out for two months, and then a long bout of internal scuffling in the government over new price caps will begin. By April we will feel a shortage, and then what? Raise prices... In short, we should expect price increases in April–May 2014. For now, it is the private retail chains (RP, Helios and others) that will have to tighten their belts. All this petty maneuvering comes down to one simple fact: a regulated market cannot live without shortages.

In the current situation, however, there is no other way out. The inefficiency of our production, outdated technology and the absence of a coherent strategy all led to this decision. Most of the measures the government is taking are aimed at propping up industries whose competitiveness is highly doubtful, and which survive only for as long as they are supported.

What we need are structural reforms and a liberalized economy, so that business itself can identify the efficient points of growth.