Illustration: AI
In Kazakhstan, UAPF pension assets managed by the National Bank fell from 26.95 trillion to 26.63 trillion tenge in September. FINANCE.kz attributes the decline to a stronger tenge: the dollar-denominated portion of savings is worth less when converted into the national currency (t.me).
What happened
UAPF stands for Unified Accumulative Pension Fund. Around 41% of the portfolio in question is invested in dollar-denominated instruments. Exchange rate movements therefore have a noticeable effect on the value of pension assets in tenge.
The tenge strengthened by 4.6% against the dollar in September. With that exchange rate shift, the same dollar amount is worth less in the national currency. This is known as currency revaluation.
Investment income since the start of the year also fell: from 1.1 trillion tenge at the end of August to around 800 billion tenge. This is the cumulative investment return: September’s decline reduced the income earned earlier.
What this means
Currency revaluation does not, in itself, mean that dollars have disappeared from the portfolio. Their value in tenge changes, and with it the monetary value of the savings. For contributors, this affects returns on pension savings.
The mechanism works both ways. When the tenge weakens, the foreign currency portion is worth more in the national currency. When it strengthens, that portion is worth less. The same dollar amount can therefore have a different value in tenge from one month to the next.
Foreign currency investments are intended to protect savings against devaluation — a fall in the tenge’s exchange rate. The other side of that protection becomes apparent when the tenge strengthens. Still, the investment return since the start of the year remains positive: September’s decline reduced the income earned earlier.
