Kazakhstan's government is firming up plans to bolster banks and protect jobs as the country's financial picture grows gloomier.
"Instability on world financial and commodities markets has reflected on Kazakhstan's rates of economic growth," said a joint statement issued January 20 by the government, the National Bank and the Agency for Regulation and Supervision of the Financial Market and Financial Organizations. The statement declared that the government's central tasks in the coming year will be maintaining social stability, supporting the macro-economic balance and stimulating economic growth and business activity. An anti-crisis package for 2009-2010, adopted late last year, aims to stabilize the financial sector, support small and medium-sized businesses, boost the agro-industrial sector and prop up the country's ailing real estate market.
In December President Nursultan Nazarbayev estimated the economic assistance package to be worth a massive 2.2 trillion tenge -- some $18 billion at current exchange rates, or around 14 percent of GDP. The package includes $5 billion for the financial sector, $5 billion for the construction industry, at least $3 billion for the agro-industrial sector up to 2011, $1 billion for small and medium-sized businesses and $1 billion for infrastructure projects. This comes on top of $4.5 billion already released in emergency assistance in 2007 and 2008.
Plans to inject liquidity into the banking sector moved ahead with an announcement on January 19 that two of Kazakhstan's largest banks, Kazkommertsbank and Halyk Bank, are each to receive $1 billion in state funds before the end of January. The government has also finalized deals with these two banks to buy 25 percent of their shares in a bid to prop them up. A total of $300 million in state funds will be spent on a stake in Kazkommertsbank and $500 million on a share in Halyk Bank. The government is expecting to reach agreement to spend a further $2.67 billion buying stakes in two other banks, BTA Bank and Alliance Bank, by the middle of February.
The stabilization package will serve to prop up the banking and construction industries and stave off social dissatisfaction, Maria Disenova, an analyst at the Institute for Economic Strategies-Central Asia, told EurasiaNet: "I think that in a way the anti-crisis plan will be effective as it will help keep the banks afloat and will help finish certain construction projects so that there is no huge social crisis."
Disenova questioned, however, how sustainable the large cash injections will be for Kazakhstan given that much of the funding is being drawn from the National Fund of accumulated oil wealth. A total of $10 billion has been pledged from the National Fund, whose assets totalled $27 billion at the end of 2008.
There are also questions about how much the anti-crisis package will help the Kazakhstani government in achieving stated goals, in particular the diversification of the economy away from the extraction industries. "The anti-crisis plan will provide a cushion to the banking, construction and maybe mining sector, if need be. But it is unclear how long the government will be able to sustain the action," Disenova said. "It will not be able to achieve other objectives claimed -- diversify the economy, develop different industries and help small and medium business."
The government has also committed itself to maintaining a stable exchange rate for the tenge, ensuring a favorable investment climate and a competitive environment and implementing infrastructure projects, which will help create jobs. To safeguard the labor market officials have pledged to crack down on illegal labor migration. In recent years Kazakhstan's booming economy has proved a magnet for job-seeking migrants from poorer neighboring states such as Uzbekistan, Kyrgyzstan and Tajikistan.
Clamping down on unskilled illegal migrants may ease unemployment in Kazakhstan -- where in 2009 it is forecast to rise 1 percent on 2008 to 8 percent -- but the move will have a knock-on effect on the ailing economies of other Central Asian countries.
Government figures released in mid-January show that the economic slowdown has already impacted thousands of jobholders in Kazakhstan, Interfax-Kazakhstan reported: 25 enterprises employing over 7,000 staff have stopped work in connection with the financial crisis, and a further 234 firms employing some 72,000 people have sent staff on compulsory leave, or are operating part-time. The number of jobs affected may be far higher than official statistics indicate, observers add.
The latest economic figures released in Kazakhstan confirm longstanding predictions that the robust growth of recent years, which was sustained partly on the back of high oil prices, is slowing. Gross domestic product grew by 3.1 percent last year, compared to 8.5 percent in 2007 and 10.6 percent in 2006. This year, with calculations based on an oil price of $40 per barrel, it is expected to slow further to around 2 percent, Economy and Budget Planning Minister Bakhyt Sultanov told the cabinet on January 20.
Meanwhile, inflation is slowing and is expected to stand at around 9 percent in 2009, against 9.5 percent in 2008 and 18.8 percent in 2007.
The administration is confident that its anti-crisis package can help Kazakhstan stave off recession. Speaking at the January 20 cabinet meeting, Prime Minister Karim Masimov -- who has said that the crisis can be expected to last for at least two years -- expressed confidence that the government's plans should see Kazakhstan "painlessly" through 2009.
Joanna Lillis is a freelance writer who specializes in Central Asia.