Energy-rich Kazakhstan's currency nosedived some 23 percent on Thursday after authorities shifted to a free-floating exchange rate as the Central Asian nation battles to cope with lower oil prices.
The Kazakh tenge's plunge to over 257 to the dollar sparked jitters across the country as flustered shopkeepers and foreign exchange workers struggled to cope with the sudden change.
Kazakhstan's Prime Minister Karim Massimov announced at a government meeting Thursday that authorities were abandoning a currency band for a free-floating exchange rate amid bleak price forecasts for crude oil, Kazakhstan's linchpin export.
"The National Bank and the government have decided to implement a new monetary policy from August 20, 2015 based on an inflation-targeting regime," Massimov said.
Widely viewed as a success story in decaying post-Soviet Central Asia, Kazakhstan has appeared under intense economic strain ever since the national bank ordered a shock 20 percent devaluation against the greenback last year.
The ex-Soviet nation's 75-year-old President Nursultan Nazarbayev said Wednesday that future economic planning in the country should be adjusted to assume oil prices at $30-40 per barrel and that belt-tightening measures would also affect showy national projects.
Oil prices slid to a new six and a half year low in Asia Thursday, approaching the key $40 a barrel level after a surprise rise in US inventories added to concerns of a supply glut.
In addition to slumping prices for crude, which accounts for half of Kazakhstan's export, the national economy has been hit by falling demand in two key foreign markets, Russia and China.
China last week devalued its yuan currency penalising natural resource exporters across the world.
The slide of the Russian ruble -- which on Thursday slipped to 75 against the euro for time in six months -- has also taken its toll on Kazakhstan, resulting in cheaper Russian products flooding the domestic market.
- Shops shut -
Analysts said some investors had been waiting a long time for the devaluation of the national currency but that it had still sparked turmoil in the retail sector.
"For some foreign investors this move is long-awaited," Tulegen Askarov, president of the Biz Media business journalism centre in Almaty, the country's largest city, told AFP.
"For small and medium-sized businesses it has created uncertainty. Some car dealers are shutting up shop temporarily."
Russian bank VTB Capital noted Thursday that the latest measures were understandable since "despite gradual widening" of the tenge-dollar spread last month, the tenge "still remained overvalued," especially in the context of the battered ruble in neighbouring Russia.
In Almaty few people dared to enter foreign exchange bureaus as they waited to see what the tenge would do next.
"Everything I do is connected to the national currency: study, travel," said Zhanar Agatayeva, a 19-year-old student.
"Now I fear my university will force up fees," she said, eagerly watching the rapidly changing figures outside one exchange bureau.