ASTANA: Kazakhstan’s central bank hiked Friday its key interest rate to 16 percent from 12 percent as the country grapples with swings in its oil-dependent currency, the tenge.

The rate hike comes as the national bank aims to combat inflation and dollarization of its economy after Kazakhstan shifted to a free floating exchange rate in August.

“Considering the economic data and prospects for growth the National Bank decided to raise its key interest rate to 16 percent to keep inflation in the medium-term target range of 6-8 percent,” the central bank said.

Ever since letting the tenge float the Kazakh currency has swung between 208 and 300 tenge to the dollar. The government has spent over $1 billion to stem volatility since abandoning its currency corridor.

The tenge traded at 271 to the dollar (302.63 to the euro) on Friday evening.

Macro-Advisory, an economic consultancy, said earlier this week that Kazakhstan had “no choice” but to allow the currency to float freely in the context of low oil prices and “the loss of competitiveness to the Russian ruble.”

Russia is a key trading partner for the Central Asian country and the pair are founding members of the Kremlin-led Eurasian Economic Union.

Kazakhstan last year faced growing calls from exporters to devalue the tenge after the Russian ruble lost roughly half its value in the space of a year due to low oil prices and Western sanctions over Moscow’s role in the Ukraine crisis.

But ratings agency Moody’s warned last month that the tenge’s depreciation is “only moderately beneficial to Kazakhstani exporters, as a substantial portion of their costs consist of foreign currency denominated expenses.”

Slowing growth in China is another factor that has placed pressure on Kazakhstan’s resource-based economy.