DAVOS, Switzerland (Reuters) - Some of Kazakhstan’s banks will need capital injections to tide them over current market stresses and the central bank is in discussions to provide liquidity in the local tenge currency, Prime Minister Karim Masimov told Reuters.
The oil exporting nation is suffering from crude’s price fall to around $30 per barrel and the recession in neighboring Russia. Its tenge currency has slid to record lows against the dollar and economic growth last year was a meager 1.2 percent. Oil provides more than half its budget revenues.
The moves have revived memories of the period immediately after the 2008 global crisis when several Kazakh banks defaulted on external debt. Fitch recently downgraded some bank ratings, warning of pressures on asset quality and capitalization.
Masimov said he did not envisage a similar crisis, noting that Kazakh banks’ debt level now was far less than in 2008 when it exceeded 50 percent of gross domestic product.
Speaking to Reuters on the sidelines of the World Economic Forum in Davos, Masimov who was prime minister also in 2008, said some banks would need capital injections.
“Right now the central bank governor is in discussion with shareholders of commercial banks. I don’t know details on how much capital injection will be needed but for some of the banks shareholders will have to capitalize themselves or attract fresh capital into the banking system,” he said late on Friday.
“(Banks) are asking for liquidity in local currency and the central bank is working on a scheme to provide liquidity.”
The tenge has dropped around 11 percent against the dollar this month, putting overall losses at more than 50 percent since authorities abandoned their pegged exchange rate policy last August. It closely tracks the rouble which fell this month to record lows.
“Of course value of the rouble is affecting the exchange rate of the tenge but I think we have more or less reached bottom with price of oil plus-minus 30 dollars it’s more or less (fair value),” Masimov said.
“With price for oil at $30-plus we will be on positive growth but with $30-minus there is a risk we may go to negative growth,” he said, adding stimulus plans were being considered.
While the budget is based on $40 per barrel oil, Masimov said the government had calculated ways to deal with further price falls. However, there are no plans for extra borrowing to make up for budget shortfalls, he said, adding Kazakhstan would not venture onto global bond markets in 2016.
Instead it will rely on an oil fund, where it has saved $66 billion, with plans to withdraw up to $8 billion a year for budget support if needed, the prime minister said.
The central Asian country also last year announced plans for sweeping privatizations, due to start as early as this year, to cope with the low commodity prices.
Masimov did not give a time frame but said companies would be sold off in full via stock market listings or stake sales.
“All national companies will be privatized including national oil, railway and telecoms companies,” he said.
Reporting by Sujata Rao; Editing by Janet Lawrence
Our Standards: The Thomson Reuters Trust Principles.