Kazakhstan’s deputy finance minister has told Emerging Markets that recent ratings downgrades and fears over the country’s banking sector are excessive, and argued that there are already sufficient safeguards in place to avoid a serious crisis.
In his first interview since moving to his current post from the IMF in September 2007, Daulet Saudabayev condemned the Standard & Poor’s downgrade of the sovereign ratings on Kazakhstan in October.
“If they’d done this a year ago because of risks on the horizon, I might have understood. But the risks have appeared now, and we managed them – the central bank’s measures are working well,” he said.
Saudabayev added that the government had adjusted fiscal policy to provide a mechanism to help banks to increase funding for their operations if necessary.
Speaking to Emerging Markets shortly before last week’s downgrade of several Kazakh banks by ratings agency Moody’s, Saudabayev also sought to clarify an announcement in early October that the government was considering buying depressed shares in Kazakh companies – especially banks – listed overseas. This had sparked concerns about an enlarged role for the state in the economy. According to Saudabayev, the plan is only at “a very early stage”, and little intervention would be needed if valuations recovered.
“In the end, what we really want is to encourage more Kazakh companies to list domestically, to develop the local capital market and provide more assets for Kazakh banks and pension funds.”
He argued that this would help reduce risks in the banking sector, by allowing investors to diversify portfolios. To further assist the development of the non-oil sector, the finance ministry is also considering new enabling legislation. Saudabayev said the Kazakh government still welcomed foreign investment, provided companies are willing to make a long-term commitment to the country.
“We need to establish an open and transparent tender system for public-private partnerships,” he said. “We also need make sure the contractors are responsible to the government, and that our budget is well protected from project risks.”
“If the legal framework is right, companies will be able raise capital at a lower premium by securing borrowing with the cash flow from maintenance fees paid by the government,” he added.
The government is planning 30 “leading projects” to help diversify the economy away from oil and gas, into areas such as the hi-tech and petrochemicals sectors, Saudabeyev said. He compared the proposals to those of Saudi Arabia to establish six “industrial cities” to boost non-oil investment.
He said that the government would be looking for build-own-operate-transfer arrangements of three to 15 years, rather than for private contractors simply to build new facilities and move on. Saudabeyev added that the government was working with the multilaterals to draft this system, as well as to enhance the efficiency of budgetary spending.
“We have moved on from larger multilateral conditions on privatization, ending monopolies and the like, and are now cooperating on a much more detailed level, looking at individual instruments and how each project should be managed.”
For an exclusive interview with National Bank of Kazakhstan governor Anvar Saidenov, please see "Feeling the heat in Kazakhstan"