11 October 2007
Nursultan Nazarbayev Says: "Kazakhstan’s Economy Has a Very High Margin of Safety, We Do Not Have Any Crisis Trends"

President Nursultan Nazarbayev said that at a meeting with Cabinet Ministers, and considered results of social and economic development in the country over the last nine months and set a number of goals for the nearest future.

Prime Minister Karim Masimov delivered a speech at the council and noted that high rates of economic growth were observed during the nine months of this year. As the Agency for statistics says, the Gross Domestic Product has increased by 10.2% over the eight months of 2007 in comparison with the same figure of the last year.

The economy growth is due to production increase in all major sectors. Investments in fixed capital have increased by more than 10% in comparison with the same figure of the last year.

The volume of foreign trade has increased by 31%. The population’s active incomes have increased by almost 13%, and real salaries have increased by 20% over the eight months of the current year in comparison with the same figures of the last year.

State budget funds correspond to expectations and are equal to 1.8 trillion tenges.

About 10% of population participated in the action for property legalization that was finished on the 1st of August this year. The value of the legalized assets is almost 850 billion tenges. The state budget received 60 billion tenges of taxes for the legalized properties.

The inflation rate was averaged at 8.6% over the nine months of 2007. In connection with that the Government together with regions’ governors developed a complex of measures on offering additional addressed assistance to the people.

A project of the State Program “30 corporative leaders” has been developed and is going to be considered by the President in the nearest future.

Karim Masimov underscored that the Government plans to develop a strategy for sustainable growth of the economy’s competitiveness in the nearest future. An emphasis will be put on the development of electricity production, railroad and automobile transport, telecommunications and communications in order to ensure a long-term sustainable growth in the economy.

Chairman of the National Bank of Kazakhstan Anvar Saidenov described the situation in the country’s financial market and noted that major factors allow reducing the inflation rate in the beginning of the next year.

While talking about loans of Kazakhstani banks abroad, the net volume of which was at 23.6 billion dollars last September (the banks have assets abroad costing some 21 billion dollars), Anvar Saidenov underscored that banks could manage their obligations themselves at the expense of their own means. Kazakhstani banks have 3.8 billion dollars of debt abroad that has to be paid by the end of this year.

Currently, the National Bank supports the country’s banking sector in two ways. Those are borrowing assets for a short-term at 9% of annual interest for some types of transactions and giving a dispensation to reduce minimal reserve requirements from 9 October that releases some 300 billion tenges.

“That is a large enough sum that must be used for paying external debts and sustaining credit activities. There is no need now to spend money from the National Fund,” the National Bank’s Chairman emphasized.

Arman Dunaev, Chairman of the Agency for regulating and controlling financial organizations agrees with him.

“Today, all secondary banks discharge all their liabilities in full in the face of both residents and non-residents and without any delay. The local banks can resolve all the problems of refinancing at their own expenses, and there are all preconditions to believe that in a short-term period the country’s banking system will adequately react to all external challenges in the situation that is observed in global markets,” Arman Dunaev underscored.

He also emphasized that the loan share allocated by Kazakhstani banks to mortgages is not critical in relation to the total amount, and the quality of the loan portfolio is at an acceptable level.

Agriculture Minister Akhmetzhan Esimov remarked on the measures that are being taken in order to regulate grain and flour supplies and also bread prices.

Akhmetzhan Esimov said stabilization funds have been established in all regions of the country and the problem of grain and flour supply was solved including those regions not having own grain production.

“At the same time, we enforced control over prices and they will not grow until the end of this year,” the Agriculture Minister said.

Bakhytzhan Sagintaev, Chairman of the Agency for regulating natural monopolies put an emphasis on the problem of energy-saving.

President Nursultan Nazarbayev assessed the current situation in the economy.

“Kazakhstan’s economy has a very high margin of safety and we do not have any crisis trends. Our banks are stable. They are managing the situation themselves, and if difficulties occur the state will support the banks. We have got all possibilities to do that, and our people must be confident in that. The state will discharge its obligations both internal and abroad.”

President set a number of concrete tasks for the Government.

First, it is state regulation of inflation processes, conduction of price, tariff and social policies aimed at increasing the prosperity of Kazakhstani people.

“Prices for food will not grow; the Government has taken measures to prevent it. The competition issue is very important in this matter. Second-hand dealers have monopolized the market; this is the main reason of the price growth. Therefore, we are establishing a special Agency for fair competition.”

The Head of State noted that local powers prevented bread price growth in the Southern Kazakhstan, Kostanay and Northern Kazakhstan regions.

“I am addressing all governors of regions, cities and districts: it is your responsibility to work this problem out. This is the main issue now. Governors must take control over all processes on reducing and stabilizing food prices. The active work of the financial police, Committee for fair competition and law-enforcement organs is also required in this case,” Nursultan Nazarbayev said.

At the same time, the President instructed the Government to take effective measures to protect socially vulnerable population strata.

“In 2007, extra revenues of local budgets are valued at more than 36 billion tenges. These revenues must be spent on supporting socially vulnerable population strata, many-children families, pensioners that depend on bread prices in a greater degree than others. This support must be addressed, and expenditure process must be strictly controlled,” Nursultan Nazarbayev said.

A second task set by the country’s President for the Government, National Bank and AFC is an effective conduction of explanatory work on those processes that are taking place in our economy.

As the Head of State noted, unverified information in the media, lack of explanatory work amongst foreign investors, analytics of large foreign banks, financial institutes leads to the deficiency of actual information on the condition of the country’s economy in international rating agencies and consequently to unreasoned decrease in the country’s rankings.

A third task that the President has emphasized for the Government is ensuring stability in the financial system.

“You have reported on the measures that are being taken. On the whole, I approve them. The situation in the financial market does not cause serious anxiety. Obviously, the situation in the global financial markets enforced native banks to revise their loan strategies. As a whole, it will be good for the banks themselves,” the Head of State said.

At the same time, the President noted it is necessary to take preventive measures that will allow avoiding difficult situations in the banking system.

“I instruct and warn the Government, National Bank, development institutes and the AFC that they must allocate 4 billion dollars from the budget in 2008 in order to financially support, if a need arises, the banking sector. All shareholders that invested in housing construction, small and medium-size business and also enterprises working in the framework of the Strategy for industrial innovative development must be protected,” Nursultan Nazarbayev underscored.

The fourth task is the perfection of tariff policy in electricity industry and energy-saving.

The President instructed to hold a popular explanatory work on the necessity of energy- and water-saving. It is a known fact that a GDP unit requires 3-4 times greater energy in Kazakhstan than in industrially developed countries. Low tariffs are the main cause of the branch’s lag and low investment attractiveness, they do not stimulate introduction of energy-saving technologies and equipment renewal.

The President remarked that in his opinion it is necessary to develop an integrated state program that will administrate and stimulate energy-saving technologies, and also will improve the relevant legislation basis.

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