Kazakhstan Weighs $6.5 Billion Spending to Bolster Banks

Betted On Kazakhstan’s Largest – And Cheapest – Bank

Kazakhstan is considering a 2.1 trillion-tenge ($6.5 billion) plan this year to restore banks to health, widening its budget deficit and tapping its oil wealth fund to cover the costs.

Finance Minister Bakhyt Sultanov proposed the additional spending Monday in a presentation to the cabinet, according to a website statement. The government plans to triple a special transfer from the national oil fund to the budget to 1.5 trillion tenge, while similarly widening the deficit to 1.5 trillion tenge, according to an e-mailed copy of National Economy Minister Timur Suleimenov’s speech.

Kazakhstan is weighing support for its largest lender by assets, Kazkommertsbank, which is struggling under bad loans acquired when it took twice-defaulted BTA Bank off the state’s hands in 2014. Following the collapse of crude prices that year, which dragged down the tenge and eroded economic growth in Central Asia’s biggest oil producer, almost one in three loans in Kazakhstan are either non-performing or renegotiated, according to estimates from S&P Global Ratings in October.

Halyk Bank, which is controlled by President Nursultan Nazarbayev’s daughter Dinara and son-in-law Timur Kulibayev, announced the start of the talks with Kazkommertsbank last month on a possible deal. If Kazakhstan agrees to provide money to plug holes in Kazkommertsbank, Halyk may discuss gaining control of the troubled lender, according to two people.

The central bank will inject the 2 trillion tenge of budget funds into its Problem Loan Fund unit to buy bad assets from banks, Interfax reported Monday, citing National Bank Deputy Governor Oleg Smolyakov at parliamentary talks where Sultanov and Suleimenov presented the draft amendments after their meeting with the cabinet.

The Kazakh central bank doubled emergency loans to lenders to about 400 billion tenge on Feb. 9, half of which was borrowed by Kazkommertsbank. In December, the bank said it had returned half of the 400.8 billion tenge it had borrowed earlier that month from the central bank.

Kazkommertsbank repaid about 400 million euros ($425 million) of bonds, according to a separate regulatory filing Monday.

(Corrects currency conversion in last paragraph of story published Feb. 13.)

by Nariman Gizitdinov, Bloomberg

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