KAZAKHSTAN’S ACCESS TO CASH LESSENING URGENCY OF REFORMS?

Kazakhstan’s announcement that it will soon repay the US$400 million it owes to the IMF four years ahead of schedule highlights the fact that the recovering economy now has several new sources of funding. In late April, the fourth issue by Kazakhstan of US$350 million in seven-year eurobonds was successful. Higher oil and commodity prices have led to strong fiscal revenues as well. The current account surplus in the first quarter of 2000 was US$490 million following a much improved US$171 million deficit for all of 1999. Currency reserves are above US$2 billion again in May from US$1.6 billion a year earlier (Reuters, May 17-18). On top of everything else the government is to go ahead with a US$450 million sale to Chevron Corporation of 5 percent of the state’s stake in the Tengiz oil field joint venture. The sale brings Chevron’s share in the venture to 50 percent; the state will now own 20 percent. As part of the new agreement, Chevron will also transfer another US$210 million to Kazakhstan this July rather than at the end of 2002 as part of its original agreement to pay US$420 million in two installments for its original Tengiz shares (Bloomberg, May 17). Clearly the government is not in need of these funds now. To absorb this inflow there have been discussions in the government about setting up a special fund to be managed by external asset managers. This fund would act as insurance to back up government revenues if the economy turns downward in the future.

The Kazakh government insists that though it is paying back IMF loans it will continue with the IMF economic program for the country. While the government explained the early repayment as an attempt to save on borrowing costs it will be important for Kazakhstan to keep following the IMF program in order to attract foreign investment. Borrowing costs did not stop Kazakhstan, however, from recently accepting a four-year US$400 million loan from the Asian Development Bank to finance a number of infrastructure and agricultural projects. Flush with cash, Kazakhstan’s efforts at privatization (always prone to numerous delays) appear to be faltering. Kazakhstan raised 6.8 billion tenge (US$48 million) from privatization in the first quarter of 2000, only 11 percent of the annual target. The minister of finance has stated that the country is likely to collect only 40 billion of the 59 billion (US$421 million) in targeted returns this year (Russian agencies, May 15), though even this may be an optimistic figure. Four of the original ten companies earmarked for the government’s long-awaited “blue chip” privatization program have been removed from the list without any clarification of their status. Only two companies, Mangistaumunaigaz and telecom Kazakhtelekom, have a chance of being privatized in 2000. A 16.7 percent stake in the state savings bank Halyk has been sold this year (Reuters, May 15). While Kazakhstan is enjoying its strong financial position, it now remains to be seen whether it will continue with the structural adjustments needed to achieve balanced growth or deal with a downturn in commodity prices or other economic shocks.

TAJIKISTAN AGAIN HIGHLY DEPENDENT ON CIS TRADE.