ALMATY/July 17 (The Bulletin) — In its annual assessment of Kazakhstan’s economy and business, the IMF said that the Kazakh banking sector is still vulnerable.

The fragility of Kazakhstan’s financial sector has undermined economic growth over the past decade, despite intervention by regulators, who have tried to legislate against bad debt, government bailouts and forced mergers.

“Despite state support, the banking sector remains weak, with high levels of bad loans,” the IMF said in a statement.

Bad loans grew rapidly after the 2015 devaluation of the tenge. It halved in value, because of a recession in Russia and a collapse in oil prices, which made dollar-denominated loans expensive to pay off.

The Kazakh Central Bank has bailed out larger banks, and overseen the merger of the country’s two biggest banks, Halyk Bank and Kazkommertsbank, but also allowed smaller banks to go bankrupt.

Kazakhstan plans to conduct what the IMF called an “asset quality review (AQR)” of large and medium banks but the IMF said that the Kazakh Central Bank needed to be careful how it reacted to the results of the review.

“The AQR may reveal the need for additional capital; any public support should be provided only to systemically-important and viable banks, subject to contributions from existing shareholders, and in the view of the IMF staff, from the budget and not the National Bank of Kazakhstan,” the IMF said.

Construction worker dies in Tbilisi Campaigners have said that safety measures on Georgian construction sites are notoriously slack. At least six construction workers in Tbilisi have already died this year on sites and in January, seven men were killed in their sleep at the apartment they shared in central Tbilisi by a carbon monoxide leak.

The authorities have said that they will also investigate how the company managing the site where Beshkenadze died was able to hire a teenager.

The law doesn’t ban companies from hiring 16-year-olds, but they are not allowed to do hard manual job until they are 18.

It said also that there was a risk that Kazakh policymakers were trying to do too much too quickly. They want to move the Central Bank from Almaty to Nur-Sultan, a plan delayed by the 2014-17 economic downturn, and set up a new financial regulator.

“(This) carries risks that should be carefully managed, including possible gaps during the transition and insufficient bank oversight and coordination with the National Bank of Kazakhstan and government,” the IMF said.
ENDS

— This story was first published in issue 417 of the weekly Central Asia & South Caucasus Bulletin