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Central Bank Governor reports to President Nazarbayev

14 november 2012, 00:57
0
Gregory Marchenko. By Vladimir Dmitriev ©
Gregory Marchenko. By Vladimir Dmitriev ©
November 13 Kazakhstan’s Central Bank Governor Gregory Marchenko reported to President Nazarbayev on the situation in the banking sector and the FX market. At the meeting they dwelt on ways to expand lending through attracting fund from pension funds, insurance companies and foreign investors.

Mr. Marchenko reported on efforts to reform the country’s pension system.

November 8 the country’s media reported that the National Bank had submitted to the Government its suggestions on how to reform the pension system. That day Mr. Marchenko elaborated that “a special working group has been launched headed by Vice Prime Minister Kairat Kelimbetov to deal with the reforms”. Mr. Marchenko said that there were 4 proposals submitted by the National Bank, by the Association of Financiers on behalf of pension funds, by the World Bank and by the country’s Ministry of Labor and Social Protection. “They coincide in some points and differ in some points (…) We hope there will be a single scenario ultimately”.

He added at that time that “there will be many debates, with the Government and the Parliament being responsible for a final decision (…) The National Bank has presented its estimates for decades to come. Our experts are confident in calculations (…) Discussions are under way”, he said.

Back in September 2012 President had tasked Mr. Marchenko and the National Bank with working out suggestions on how to reform the country’s pension system.

“If the retirement age isn’t raised, the country’s pension system will go bankrupt. It’s just a matter of time; and of course the timing depends on the volume of oil revenues”, Mr. Marchenko said at a press-conference October 10.

Earlier Tengrinews.kz reported that Mr. Marchenko doesn’t support the World Bank’s suggestion on launching a single pension fund. “We [the Central Bank] turn down the suggestion with indignation. It is wrong to invest the accumulated pension assets abroad”, he believes.

According to the Central Bank Governor, the major reason why such suggestions have been surfacing is that the pension savings figure currently stands at $18 billion, and “it is a lucrative lump of interest to many, and many entities would want to decide on investing the funds”.

Mr. Marchenko emphasized that Kazakhstan needs to think of public private partnerships to launch investment projects inside the country. He believes about $6 billion of pension assets could be invested into domestic projects involving dependable borrowers.

Central Bank Governor thinks it unreasonable to use the country’s National Oil Fund assets to fund second-tier banks. “There are a number of reasons for that”, he said at a press conference November 8.

According to him, “suggestions to use the Oil Fund’s money to slash interest rates on loans offered by second-tier banks have been voiced since the Fund was just launched, with the number of suggestions growing alongside the Fund’s assets growth”.

Mr. Marchenko elaborated that “a number of banks do have excessive liquidity (…) about $2 billion in banks’ tenge-denominated accounts with the National Bank and $3 billion in USD-denominated accounts, plus investments into the National Bank’s notes, plus about $1 billion in deposits with the National Bank (…) a sizeable part of this liquidity could be used by banks to arrange loans”.

“The second reason is that (…) a major goal of any bank is to take in short-term deposits from both individuals and legal entities to secure loans for longer periods (…)”.

“The third reason is that in order to arrange loans, second-tier banks could issue bonds and sell them to pension funds, insurance companies, foreign investors and other banks that enjoy excessive liquidity. The National Bank speaks in favor of developing this market of bonds to finance the economy”.

“The fourth reason is the question what borrowers will be favored in case banks start arranging loans relying on relatively cheap money out of the National Oil Fund (…)”.

“However, the money belongs to the Government. So it’s up to the Government to decide and the Board of the National Oil Fund headed by President Nazarbayev”, he said.

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