On November 12, 2021, President of the Republic of Kazakhstan Kassym-Jomart Tokayev delivered a video-address to Kazakhstan’s Congress of Financiers. Or, to be more precise, he read the text prepared for him from a teleprompter never taking his eyes off the camera. It is difficult to assess what the members of the Congress thought about the speech; we personally, however, were quite distressed by it – it was as if a robot was speaking to us, not a man.
This, of course, is but our personal opinion. What is more important here is that the head of the Kazakh state requested the banking sector to begin crediting the national economy.
We have devoted a number of articles to this Akorda-sensitive topic, the latest one titled On the Future of the Banking Sector was released quite recently.
In it, among other things, we register the following (quoting) -
“The thing is that, after the crisis of 2008 — 2009, Kazakhstan’s banking sector, from the driver of the national economy, has gradually turned into its holding brake. We are not going to reflect on how and why this happened but the fact remains — Kazakh banks develop their businesses, improve them and strengthen but that’s about it. Even though it is banks that serve as the very base for accelerating a country’s economic development”.
“According to the Chairperson of the Agency (Madina Abylkasymova – Ed.), in the recent years, the role of the banking sector as the economy’s loan provider has diminished with respect to the GDP. A forced increase of state investments and loans to the economy through all kinds of quasi-governmental structures functioning in different economic sectors was one of the results of the said diminishing.
This kind of differentiation of labour between the banking sector (that is mostly privately-owned) and the state budget has done and continues to do damage to all — the taxpayers, the state, the banks.
In view of this, the question arises — how can we turn the banking sector into the driver of the national economy again? Neither the National Bank of the Republic of Kazakhstan nor the Agency for Regulation and Development of Financial Market seems to know an answer”.
Now then, judging from what Tokayev said on November 12, 2021, to the members of the Congress of Financiers, the Kazakh authorities had finally come to a decision on this matter.
To confirm this, let us present some quotes from the President’s speech published in Akorda’s press-release (text in bold by KZ.expert).
“The unprecedented measures taken by the governmental and international institutes have allowed to stop further worsening of the situation. However, the uncertainty in the raw-materials, trade and financial spheres is still a factor.
Further gradual development of the financial sector with respect to the global risks and trends is one of the state’s top priorities. With that, supporting the country’s economic growth remains one of the key tasks as well. Even in the direst of times, has the state managed to support the local financial sector.
Thanks to this, banks today are quite stable and possess a great potential for crediting the national economy. Therefore, they must assume the role of one of the key drivers in the fast recovery of the economy and in its further diversification”, believes the President”.
In our opinion, it is very unlikely that Kazakh tier-two banks (or rather their majority shareholders and top-management) embrace Tokayev’s urges and rush to implement his requests. Rather, they will continue increasing their loan portfolio within the bounds of reason. First of all, by trying to provide loans to physical bodies.
You will recall that, according to the data of the National Bank of the Republic of Kazakhstan presented in its latest press-release on the state of the country’s financial market, as of the end of September 2021, the volume of the loans provided to the economy by banks constituted 16.964 trillion tenge having grown by 3.1% within a month. With that, the annual growth constituted 18.3%. For example, the loan provision to legal bodies had increased by 2.1% within a month and constituted 7.370 trillion tenge; loan provision to physical bodies had increased by 3.9% and constituted 9.594 trillion tenge.
However, since the lending rates in Kazakhstan remain high (in September 2021, the average weighted rate of return on the national currency loans provided to nonbank legal bodies constituted 11.8% against 12.1% in September 2020; the national currency loans provided to physical bodies constituted 17.5% against 17.3%), there is no guarantee that the trend continues in the future.
Clearly, such a significant (in our opinion) increase of the crediting of the national economy by tier-two banks is unlikely to satisfy Akorda. It needs the production level to grow even after the economic recovery is over in order to increase employment and the incomes of salary employees.
This can only be achieved via the following means – by either mobilising entrepreneurs (whether by force or by choice) or pumping money into the economy (wether by providing loans or investing in it).
As for the former, Akorda and the Library are incapable of performing such task. Whereas they can try and pump money into the economy. And, since the situation seems bleak as far as foreign investments are concerned (not counting the notorious US$6.1 bln from the UAE), there is only one real way to do it – increase the crediting of the economy.
But how are they to make tier-two banks provide money to those who need it? For Akorda and the Library’s biggest problem lies in the fact that most Kazakh banks are controlled by the First President’s closest relatives and allies. We are not going to name their names, this is a matter of common knowledge.
Of course, it would be interesting to calculate what share of the local banking sector is controlled by the members of the Elbasy’s clan. By our crude estimate, we may be talking about no less than two thirds of the sector taking into consideration the affiliated banks of foreign financial groups and almost 100% without taking them into consideration.
Therefore, Kassym-Jomart Tokayev is not going to be able to make the banks credit the economy at all costs. Simply because, to Nursultan Nazarbayev, his own shirt (relatives and allies) is much closer to his body than his successor wants it to be.
Under these circumstances, the current President of the Republic of Kazakhstan and his team can only hope that the recovery growth in the global economy and inside the country converts into a routine growth. In this case, there is a chance that the Kazakh economy, very small in terms of its size and greatly dependent on what’s happening in the world and the two neighbouring states, revives and starts developing with an unprecedented speed.
