Kazakhstan: Government comes to the banks’ rescue

As was widely expected, the government in Kazakhstan has stepped in to support the central Asian republic’s embattled banking sector. Since the onset of the global credit crunch last August, Kazakh banks have found themselves under severe pressure given the choking off of cheap funding from abroad, which helped to finance the rapid expansion of branch networks and lending portfolios at home. At the same time the domestic economic environment has deteriorated rapidly, with GDP this year expected to come in at 4.5% – less than half the 10% average annual growth levels seen since the start of the decade. The straitened economic circumstances have also led to a sharp increase in bad debt levels. While pre-credit crunch non-performing loans were in the range of 1.5% to 3% they have now jumped to 7% to 8% although some observers believe the true figure is as high as 15%.