On July 20, 2020, the National Bank of Kazakhstan reduced the base rate to 9% per annum and narrowed the corridor to +/- 1.5 percentage points. You will recall that we have presented our assessment of this decision and the agency’s overall policy in the article «On the Nationalisation of Timur Kulibayev’s Bank».
Here is a summation of our assessment. Since a significant part of the local banking sector is controlled by family members and allies of the First President of Kazakhstan and the «Leader of the Nation» Nursultan Nazarbayev, these financial institutes have now become a collective «golden calf». That very one that the state and taxpayers cannot «touch» but are doomed to feed and protect.
And since the internal political task of the National Bank of Kazakhstan differs from that of other central banks, it does not participate in the state programs of pumping up the economy with liquidity, does not buy up assets from the market, does not give direct loans to heavy borrowers and, generally speaking, acts in a very passive fashion from the internal political standpoint. And there seems to be no way out of this dead end situation when Kazakhstan’s two-tier banks have become a setback for the national economy.
This is why, to solve this problem, we have suggested a partial nationalisation of the banking sector starting with Halyk Bank of Kazakhstan owned by Dinara and Timur Kulibayevs (the Elbasy’s daughter and son-in-law) that are officially Kazakhstan’s richest family. And without any material compensation as it was done, for instance, with BTA Bank JSC in 2009.
Obviously, such an operation will invariably cause the political and legal difficulties and, so far as the Elbasy is still alive, cannot be done in principle. But if it will be done (whether by the current President or somebody else), the scheme that, today, is functioning under the patronage of the Central Bank (when surplus liquidity is withdrawn from the financial market allegedly in order not to allow for it to cross-flow to the currency exchange market thus preventing devaluation of the national currency) will no longer be of relevance. Then, the volume of business loans may grow by about a factor of two in comparison to the current level.
With that, we fully realise that the matter lies not just in Nursultan Nazarbayev’s relatives and allies. The existing scheme of the Kazakh banking sector’s operations led by the National Bank is but a big feeder used by the country’s entire ruling elite. Because it is the members of this elite that usually own the biggest bank deposits as physical and legal bodies and receive the uber-high financial rewards according to the international standards.
The problem, however, lies in the fact that this policy pursued by the National Bank with Akorda, the Library and the ruling elite clearly showing through its behind is doing incalculable damage to the country and its economy. Moreover, it rigorously prevents it from recovering and then from developing as well. With that, all the attempts to somehow change this policy are successfully struck down under different pretexts.
As an unavoidable consequence, money in Kazakhstan cost about twice as much as in the allied neighbouring Russia. You will recall that, on July 24, 2020, the Bank of Russia once again reduced the base rate (albeit by 0.25 p.p.only) from 4,5% to 4,25%. Nonetheless, in her concluding address, Ms. Elvira Nabiullina suggested that such tactics may be continued.
However, even without it, there can be no doubt that, for Russian banks borrowing money from the Bank of Russia, the interest rate is twice as low as that for Kazakh banks borrowing money from the National Bank of Kazakhstan. With that, the earning powers of the Russian and Kazakh business, particularly in services, trade and non-resource-based industries, are approximately the same. And if they do differ from each other, then definitely not by a factor of two.
In other words, in order to retain the property in the form of banks and the feeder in the form of liquidity withdrawal (the scheme that costs to the state quite a lot), Akorda and the Library are consciously sacrificing the rest of the non-resource-based economy and practically all the citizens by blocking the only real local economic driver — credit granting.
With that, for some reason, they hope that foreign investors will come to the country and provide loans to what Kazakh banks do not want to credit — that same Halyk Bank of Kazakhstan for instance.