SEPT. 23 2015, ALMATY (The Conway Bulletin) — The Kazakh Central Bank presented a bill to parliament that will force people to take loans in tenge, a tactic it says is necessary to wean the economy off its addiction to US dollars.
Shaken by a 40% drop in the value of the tenge over the past 18 months, the Central Bank wants to ensure that commercial banks do not accrue a large amount of bad loans in US dollars as they did during the 2008/9 Global Financial crisis.
“This is an effort to protect customer’s rights and to decrease the rate of non-performing loans for second-tier banks,” Kuat Kozhakhmetov, deputy chairman of the Central Bank, said when he presented the bill to the parliament.
If the bill becomes law, people who have not earned their salary in a foreign currency for the 6 months before asking for a loan will will only be able to apply for a tenge loan.
According to a recent IMF study, almost 60% of the total loans issued by financial institutions in Kazakhstan are denominated in a foreign currency. The Central Bank also said that 14% of mortgages are currently denominated in foreign currencies.
People in Kazakhstan have used foreign currency loans to buy goods indexed to the US dollar or the Russian rouble, such as houses or cars. Salaries are often paid in tenge but are indexed to the US dollar.
A fall it the value of oil and a slump in the Russian economy has pressured the tenge and other regional currencies. Loans taken out in US dollars have become much more expensive to service.
ENDS
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(News report from Issue No. 249, published on Sept. 25 2015)