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Modern Kazakhstan

Image and Realities

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Edited By Aydar Amrebaev, Hans-Georg Heinrich, Ludmilla Lobova and Valikhan Tuleshov

Against the backdrop of its mineral wealth, Kazakhstan has been touted a Central Asian tiger state. In contrast to most other Central Asian countries, it was able to evade civil war and large-scale bloodshed and to assume a leadership position which won international recognition and respect. At the same time, the country could not evade the global financial crisis and its human rights record is far from being immaculate. This volume analyses the economic, political and social dynamic of modern Kazakhstan as seen by insiders and Western experts. Their opinions converge on the assumption that there are hard times ahead but that Kazakhstan has the potential to weather the storm.

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Stephan Barisitz, The Kazakhstani BankingSystem: Highly Leveraged Boom, Painful Bust,Costly Recovery

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171 Stephan Barisitz107, The Kazakhstani Banking System: Highly Leveraged Boom, Painful Bust, Costly Recovery Abstract Pushed by expanding income (on the back of rising oil prices) and by rapid external debt accumulation, the Kazakhstani banking sector fea- tured one of the most dynamic credit booms in CESEE until 2007. Fol- lowing the US sub-prime crisis, banks’ access to external funding plum- meted and credit expansion ground to zero. The global economic crisis that broke out in late 2008 forced credit institutions to drive down their external indebtedness. Moreover, the (temporary) collapse of the oil price and the devaluation of the tenge cut domestic demand, liquidity and solvency. The share of non-performing loans (NPLs) skyrocketed from 5% at end-2008 to 21% a year later, and further to 26% in mid-2011. Large losses stemming from real estate exposure (burst of housing bub- ble), related-party lending, and fraud, likely played a role. Loan-loss pro- visions were sharply ramped up, profitability was all but wiped out in 2008 and hefty losses incurred in 2009 (ROA end-2009: -24%), when sector capital even turned negative. The authorities’ crisis-response measures included the nationalization of two of the four largest banks and the recapitalization (via the acquisition of minority stakes) of the two others in early 2009 (all four banks together accounting for two thirds of sector assets). The two nationalized banks then defaulted on their high foreign liabilities and initiated debt-restructuring negotiations that pro- duced steep haircuts (53% resp. 76%) for creditors in 2010. The sector’s debt...

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