Publication: Monitor Volume: 4 Issue: 153

Late on August 6, Kazakhstan’s National Bank Chairman Kadyrjan Damitov announced a rise in the bank’s refinancing rate from 18.5 to 20.5 percent. The move is seen as a reaction to losses incurred by the republic as a result of sharp drops in the prices of three of its key exports–oil, metals and grain. Kazakhstan has also been seriously affected by the Russian and Asian financial crises. (Reuter, August 6; Delovaya nedelya [Almaty], August 7)

Local analysts concur, however, that the rate hike, conceived as a safety measure, is unlikely to have any real impact. Kazakhstan’s already relatively high interest rates have not yet attracted foreign capital and domestic enterprises do not tend to raise funds through the banking system. Argyn Totkamysov, analyst at Deutsche Bank in Almaty, said that, whereas in Russia some 6-7 percent of the economy is financed through the banking system, in Kazakhstan the level is as low as 1-3 percent. (Reuter, August 6) The National Bank’s Damitov assured markets that two other key macroeconomic indicators–inflation and the exchange rate–would remain stable. He said the bank does not intend to devalue the tenge (currently at 77 to the dollar), while inflation for 1998 is still predicted at around 8 percent.

The hike follows last week’s US$580 million cut in 1998 budget spending and a downward revision of expected 1998 gross domestic product growth from three percent to 1.5 percent. Prime Minister Nurlan Balgimbaev, who is under considerable pressure from President Nursultan Nazarbaev to balance the books, reiterated the government’s determination to reach its original privatization target of 45 billion tenge this year. (Russian agencies, August 4 and 6)–SC