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Kazakhstan: Restructuring may reveal emperor’s new clothes

Bad debts rise to new highs; Investors tire of mounting problems

The restructuring of almost $20 billion of foreign debt by two of the leading Kazakh banks in the coming months is likely to prove a key driver of sentiment towards the central Asian state’s embattled financial sector. "The debt restructuring process in Kazakhstan has been going on since March now and we have had months of uncertainty as a result," says Milena Ivanova-Venturini, head of banking research at Renaissance Capital in Almaty. She adds that with Kazakh banks having long been touted as the best-regulated and best-managed banks in the Commonwealth of Independent States the mounting financial problems facing the sector have engendered a growing sense of investor fatigue. "In terms of the banks, Kazakhstan is not really on people’s radar screens any more," she says. "There’s a sense of ‘The emperor’s new clothes’ about the sector."

Challenging future

non-performing loans in the banking sector

As the latest data illustrate, banks in Kazakhstan face an extremely challenging future, with bad debts approaching alarming levels after nearly a decade of breakneck lending, funded principally by foreign borrowing.

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