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IMF on Kazakhstan’s banking sector 31 октября 2011, 16:08

According to the IMF, a key task for Kazakhstan is a realistic revision of the banking sector.
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The deteriorating quality of Kazakhstan banks’ loan portfolio against the backdrop of growing global economic risks is one of the major problems of Kazakhstan, Dmitry Rozhkov, IMF senior economist for Middle East and Central Asia, said when presenting the IMF report on the economies of the Caucasus and Central Asia, Novosti Kazakhstan reports. In this context, according to the IMF, a key task for Kazakhstan is a realistic revision of the banking sector. A strong foreign trade and a stable budget position are two major favorable factors for the nation’s economy. “There should be a clear picture of where NPLs are concentrated, what the actual provisions are (…) and further possible actions to recapitalize (…) with funds coming either from the shareholders or from the Government”, Mr. Rozhkov said on Monday at a press-conference in Almaty. According to the IMF, non-performing loans (NPLs) stand at 28%, with the figure making up 26% in October 2010. “A distinguishing feature is that the level of toxic assets is not diminishing, but growing”, he said. According to him, one of the major factors affecting the banks’ loan portfolio is weakness of the sectors where most of loans had been going before the crisis, i.e. construction sector. “There must have been hope that with the economy upturning, part of the NPLs would start working. However, the expectations were not met”, David Owen, Deputy Director of the IMF's Middle East and Central Asia Department, said. “On the part of the global economy there is no support to expect; vice versa, we can expect certain worsening of the situation”, Mr. Rozhkov said. Among other priority tasks set before Kazakhstan in the mid run is the economy diversification, effective management of oil revenues and attraction of foreign investments to non-oil sector. The IMF statement following the mission of October 21-28 notices that the lingering weak points of the banking sector are “a major concern”. “Despite the restructuring of the foreign debt and the state support, quality of bank assets kept on worsening, with the amount of NPLs staying high [according to international norms]. High accrued interest [not received], substantial volume of restructured loans and low profitability cause risks to the capital adequacy”, the statement reads. According to the IMF, pin-pointed subsidized loans, support from the Government and adaptive monetary policy are unlikely to encourage lending in the short run, given that banks are reluctant to take risks and legal entities keep on decreasing the share of borrowed funds.

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