When a country devalues its currency, the value of its currency falls relative to other currencies. This can have several implications, including:
* Increased import costs: Devaluation makes it more expensive for a country to import goods and services from other countries because the domestic currency is now worth less.
* Higher inflation: Devaluation can lead to higher inflation, as the government may increase the money supply in order to stimulate the economy.
* Reduced foreign exchange reserves: Devaluation can reduce a country's foreign exchange reserves as the government may have to sell its foreign exchange reserves to defend the value of its currency.
* Increased poverty: Devaluation can increase poverty, as the poor are more likely to be affected by higher prices for imported goods and services and inflation.
How the devaluation of the tenge in Kazakhstan affected the poor
In 2015, the Kazakh government devalued its currency, the tenge, by about 20%. This had several negative consequences for the country's economy, including:
* Increased import costs: The devaluation made it more expensive for Kazakhstan to import goods and services from other countries, leading to higher prices for imported consumer goods such as food, clothing and electronics.
* Increased inflation: The government increased the money supply in an attempt to stimulate the economy, leading to higher inflation rates.
* Reduced foreign exchange reserves: The devaluation reduced Kazakhstan's foreign exchange reserves as the government had to sell of some of its reserves in order to defend the value of the tenge.
* Increased poverty: The devaluation increased the poverty rate in Kazakhstan, as the poor were disproportionately affected by the higher prices for imported goods and services and the increased inflation rate.
Conclusion
The devaluation of the tenge in Kazakhstan had several negative consequences for the country's economy, including increased poverty. The devaluation made it more difficult for the poor to afford basic goods and services and reduced the value of their savings. The government needs to take steps to mitigate the negative consequences of devaluation in order to protect the most vulnerable members of society.
