Kazakhstan is introducing a freely floating exchange rate for its national currency tenge starting from August 20.

"The National Bank and the government have adopted a decision to begin implementing a new monetary policy starting from August 20, 2015, which will be based on inflation targeting, abolish the currency corridor and switch to a freely floating exchange rate," Kazakh Prime Minister Karim Masimov told a government session in Astana on Thursday.

The tenge exchange rate will be formed depending on market demand and supply, taking fundamental internal and external macroeconomic factors into consideration, he said.

The Kazakh government voted in favor of adopting this proposal.

Masimov also noted that "it means that changes of the exchange rate will include both weakening and strengthening, which will be determined by the situation in the global economy and [the situation] on the domestic currency market."

"The National Bank will not interfere in forming the market level of the tenge exchange rate, but it retains a right to participate in the domestic currency market by conducting currency interventions should a threat of destabilization in the country's currency system emerge," the prime minister said.

"Forming the exchange rate on the basis of market demand and supply without interference on the part of the state will create the necessary prerequisites for restoring economic growth, boosting credit and investment activity, creating new jobs and lowering the inflation rate to 3%-4% in the mid-term prospect," Masimov said.