This is a fun report on the optimism surrounding the entrance of some of Kazakhstan’s larger banks into the “top tier” circle of international finance. But what good is a silver lining without cloud?
Kimming noted that foreign debt in the Kazakh banking sector of over 40 percent, wage growth, and consumer-driven inflation of about 8.5 percent that makes for a “dangerous situation.”
He called it the “darker side of Kazakhstan’s success story.”
“The system is under stress,” Kimming said. “Credit proceeds versus the assets booked are not the same quality of assets typical in any country where you have this type of credit growth. On top of that, credit growth is typically accompanied by significant real-estate appreciation. And the real estate is typically the security for credit growth. Obviously, the banks have to be very cautious.”
Even President Nursultan Nazarbaev has warned that Kazakh banks are dangerously exposed in the area of corporate loans. And many analysts have warned that the Kazakh economy risks overheating at its current pace.
This is interesting. Of course there are always pitfalls when a not-fully-there country tries to take on the world, but I think Kimming underplays how flexible Kazakhstan can be, especially with all the old Eastern Bloc countries being so afraid of Russia. In a bid to reduce its dependence on Russian oil sent through Belarus, Poland is looking at a deal with both Kuwait and Kazakhstan. The Kazakh government is similarly finding new ways of ingratiating itself to NATO, which could post some interesting possibilities a few years down the line should the U.S. wish to maintain a presence in Central Asia but is sick of dealing with the fickle autocrats in Kyrgyzstan.
Weirdly, and this is purely the result of a google search, Ukraine has declared 2007 The Year of Kazakhstan. Hah.
Update: Abilmazhen Gilimov, former chairman of the board of Nurbank, is under investigation for fraud. And, just because I happen to have the image handy (don’t ask):
{ 3 comments }
If anything, KZ banks are probably a little too flexible, if you take my meaning. That’s what’s causing concern.
The RFE/RL story doesn’t mention it, but their wives believe that the president’s son-in-law, Rakhat Aliyev, is responsible for their husbands’ disappearance.
Not exactly related to the above but does concern Kazakh banks. A few months ago I was chatting with a couple of Kazakh friends about the housing, insane prices, having to move out of centre due to rent etc. Talking about getting a ‘mortgage’ one remarked that if you ask around, just a little, you can find bank clerks (presumably somewhat higher than front desk staff) who will happily give you whatever loan you want to buy a flat if you slip them $1000. The idea being that you can then sell on the proprty. Checks seem limited and slow. The workers at the bank apparently take the attitude that nothing will come back to them as they will probably have left.
Comments on this entry are closed.