Kazakhstan banks need to get rid of ‘bad loans’ to boost lending to economy — expert


ASTANA (TCA) — Senior partner of the Center for Strategic Initiatives and a member of the Advisory Board for Economic Affairs under the Government of Kazakhstan, Olzhas Khudaibergenov, believes that cleaning of Kazakhstan’s banks from non-performing loans is one of the necessary measures which should no longer be postponed, the official website of the Prime Minister of Kazakhstan reports.

The Kazakh Government recently decided to allocate 2 trillion tenge (around US $6.2 billion) for improving the country’s banking sector by a capitalization of the Fund of problem loans.

Khudaibergenov recalled that in his Address “Third Modernization of Kazakhstan: global competitiveness,” President Nazarbayev said that Kazakhstan needs to “reset” its financial sector and, in particular, needs to develop a set of measures to improve the health of the banking sector.

The Head of State considers it necessary to accelerate the work on clearing the banks’ balance sheets from the “bad loans” and, if necessary, to ensure their capitalization by the shareholders.

According to Khudaibergenov, the problem with “bad loans” has lasted from 2008-2009.

“All this time it has been subjected to cosmetic solution methods. So far, there are no proper mechanisms for cleaning the banking sector from bad loans,” the expert said.

“The banks can not increase lending without the removal of bad loans and the economy can not grow,” he added.

At the same time, he believes that bad loans can not be simply written off, and the problem should be solved by capital injections from the state and by the banks’ shareholders.

Khudaibergenov also said that the program to clean bad loans should take into account the specifics of each bank, and provide for tax incentives to motivate banks for the cleaning.

Sergey Kwan