Kazakhs approve $ 10 bn financial rescue package

Nov 25, 2008 01:00 AM

Kazakhstan's government approved a $ 10 bn financial rescue package that it hopes will lead the oil-rich country out of economic crisis over the next two years. The global financial crisis has put a severe liquidity squeeze on the Central Asian nation and sharply reduced income from oil exports, forcing authorities to draw up ambitious plans to revive the economy.
"This is a very concrete program which has been allocated $ 10 bn from the national welfare fund, the state budget and pension funds," Prime Minister Karim Masimov told a government meeting.

Under the plan backed by President Nursultan Nazarbayev, $ 4 bn will be invested in propping up the financial sector. Another $ 3 bn will be allocated to revitalizing the real estate sector, formerly a key economic driver that has been battered by excess exposure to cheap foreign credit. The government has also set aside funds to support small and medium business, agriculture and development of infrastructure and industry.
The plan "will allow us to avoid, as has happened in some countries, a sharp deterioration of the situation, which will enable Kazakhstan to survive the global crisis with a renewed, stronger and more competitive economy," Masimov said.

Kazakhstan has won praise from the International Monetary Fund for efforts to minimize the impact of the global turmoil. The country's banks were among the first to be hit by the worldwide liquidity crunch in 2007 because of high reliance on foreign borrowing. Top banks have survived, but the government says lenders will need to pay back around $ 12 bn in 2009.
Samruk-Kazyna, a state-run national welfare fund, earlier this month agreed to pump $ 3.5 bn into the country's four top banks by taking stakes in the lenders.

The government forecasts that gross domestic product growth will slow to 5 % in 2008, from an average of 10 % over the last five years.
National Bank chairman Anvar Saidenov said that the cooling retail sector would limit inflation to 10 % in 2008, down sharply from nearly 19 % in 2007.

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