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The Kazakh miracle

In just over 12 years Kazakhstan has recast itself from a basket case economy into net creditor to the world thanks to its vast oil reserves. But there are worries that the boom is not being used effectively for the benefit of the citizens and that foreign investors might be interested only in exploiting the country's petroleum reserves. Chris Pala reports.

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A DECADE AGO, Kazakhstan looked like a classic basket case, with inflation at 2,000% a year darkening a landscape replete with shuttered factories and fallow farmland.

Today, growth has totalled some 40% over the past four years – the fastest expansion in the world after Equatorial Guinea, which is in the midst of its own oil boom. Inflation is 6%, the budget surplus was 2% in 2003 and this vast country stretching from Europe to China is a net creditor to the world. Last year, Moody's upgraded the sovereign to investment-grade Baa3.

At independence in 1991, Kazakhstan had a per-capita GDP that was 40% of Russia's. It has now caught up with its neighbour to the north, which colonized it for nearly two centuries, and expects to exceed it on a GDP-per-capita basis in 2004.

Though crude oil sales account for only 18% of GDP, petroleum is the locomotive of the economy. Production has risen past 1 million barrels a day and is expected to triple in 15 years or so – the fastest increase expected of any country, at a time when oil prices are nearly double what they were as recently as the late 1990s.

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