Kazakhstan has said it might return to the international bond markets should the difficulties of its domestic banks increase amid the worldwide credit squeeze.
Bakhyt Sultanov, economics and budget minister, told the Financial Times: “We are considering the option of a sovereign [bond] issue. That would raise confidence . . . it would also help by setting a clear benchmark.”
Oil income has given Kazakhstan a fiscal surplus, but an international government bond could create a benchmark for commercial banks that may need to follow suit and raise money from investors outside the country.
Mr Sultanov would not elaborate on the timing or size of such a sovereign bond sale.
Last month, Kazakhstan became the first country to be downgraded by Standard & Poor’s, the credit rating agency, after the credit crisis triggered by the collapse of the US subprime mortgage market.
Kazakhstan’s central bank has announced that it would provide additional liquidity to help the country’s banks meet their external debt payments, which are expected to amount to $3.8bn in the fourth quarter and $8bn in 2008.
However, Mr Sultanov stressed that the authorities expected the country’s banks to overcome their credit difficulties and would in any case step in to prevent the collapse of any institution.
“We don’t have any problem of liquidity in the banks . . . Of course there have been reports [suggesting a crisis], but so far we have not seen any failure of any bank and all the liabilities of the banks have been met on time.”
Mr Sultanov also said the government had agreed to pump about $4bn into sectors that had been hurt by the credit meltdown, with most of that money earmarked for the construction industry to avoid the suspension of building projects.
He said that more than $1bn would be disbursed this year, with the remaining $3bn following next year.
“The boom in construction was directly dependent on lending from the banks . . . We expect that in the first half of the year [2008], the situation will still not be that stable and there will some principal that will need to be repaid.”
Construction loans account for an estimated 23 per cent of Kazakh banks’ total lending in Kazakhstan, according to research by Renaissance Capital.
Certain large banks have also invested heavily in foreign construction projects, particularly in Russia.
Kazakh construction companies are about 50 per cent leveraged to the banks.
Real estate prices, having surged 900 per cent in the past four years, have dropped sharply in the secondary market since June.
But prices for premium properties in Astana, the capital, and Almaty, the business centre, have remained stable, although sales have dried up.
Many premium construction projects have halted.
Some economists have suggested that, if kept under control, the difficulties in the banking sector could prove a blessing in disguise by helping slow the construction and housing price boom.
