KAZAKHSTAN RECEIVES NEW CREDITS FROM FOREIGN AND DOMESTIC LENDERS…

A host of international lenders have recently concluded agreements with the Kazakhstani government which should allow Astana to finance its fiscal deficits in 2000, help remove the uncertainty which hung above Kazakhstan’s fiscal balance throughout 1999, improve Kazakhstan’s economic growth prospects in 2000 and could also have some interesting side effects on Kazakhstan’s privatization programs.

The November 5 passage of a relatively austere 2000 budget (with a target deficit of 3.0 percent of GDP) helped Kazakhstan finalize negotiations with the International Monetary Fund (IMF) over an Extended Fund Facility (EFF) in mid-December (Reuters, December 14). The creation of this facility, which will make some US$450 million available in support of Kazakhstan’s economic policies during 2000-2002, was accompanied by IMF praise for Astana’s efforts in pulling its economy out of the recession that followed Russia’s August 1998 financial collapse. The IMF deal was also only one of a series of recent agreements between Kazakhstan and international financial institutions. The World Bank in November released two loan tranches worth US$175 million, and another US$200 million in World Bank credits are under discussion. And, on December 3, the European Bank for Reconstruction and Development approved a US$160 million loan to be used for Kazakhstan’s rail, energy and telecommunications sectors in 2000 (Reuters, December 3).

The government’s more immediate concerns, however, have revolved around finding financing in 1999 for wage arrears, US$630 million in debt service payments and the 1999 budget’s US$480 million deficit (3.6 percent of GDP). The EFF–US$35 million of which is to be released before the end of the year–will help close this budget gap. So will private-sector lending: Kazakhstan’s September 1999 US$200 million eurobond was followed by two additional placements in November, which yielded another US$100 million in revenues. In addition, the Kazakhmys copper giant agreed in late November to lend the government a further US$100 million in exchange for the right to manage the state’s 35 percent stake in the company.

These inflows should ease concerns about the financing of Kazakhstan’s fiscal and current-account deficits in 2000 and beyond. And in contrast to most of 1998-1999, when slumping export prices and a recession kept tax revenues below projected levels, rising commodity prices and the return of economic growth should help keep budget revenues on track in 2000. With GDP growing at a 4.9 percent rate in the third quarter, the outlook for Kazakhstan seems altogether brighter than it did a few months before then.

…BUT CREDITS, ECONOMIC GROWTH COULD BE A MIXED BLESSING FOR PRIVATIZATION.