Kazakhstan to Spend $67 Billion to Wean Economy Off Commodities

Dec. 4. Bloomberg

By Nariman Gizitdinov and Alex Nicholson

Kazakhstan to Spend $67 Billion to Wean Economy Off CommoditiesKazakhstan’s government plans to spend 10 trillion tenge ($67 billion) on industrial projects and oblige foreign commodities producers to help lessen the country’s dependence on extracting natural resources.

About 2.4 trillion tenge of the total has been borrowed from state-backed banks in Russia and China, the government said in a statement distributed at an investor conference in the capital Astana today. Nearly 2 trillion tenge of that will come from China.

Another 1.24 trillion tenge has been earmarked from state funds, including 512 billion tenge that may come from the National Oil Fund.

Kazakhstan, which holds 3.2 percent of world oil reserves, has invested $19 billion to prop up its banking system and economy since the end of 2007 as credit markets froze and a property bubble burst. The economy of central Asia’s biggest energy producer contracted 2.2 percent in the first nine months, compared with a 2.3 percent decline in the half year.

The government plans to draft legislation requiring foreign commodities producers to help ease the country’s dependence on natural resources, Nursultan Nazarbayev said at the conference.

“We will approve laws that will oblige you to participate in the country’s industrialization,” he said.

The former Soviet state is benefiting from a 78 percent gain in the price of crude this year that’s helping offset the impact of bank losses. Kazakhstan’s oil production increased 7.8 percent in the first 10 months to 63 million metric tons, the statistics office said on Nov. 12.

“The Kazakh economy has bottomed out and has already returned to growth. We project that the economy will expand 1.5 percent in 2009 and another 5 percent in 2010,” UBS AG said on Nov. 18.