Antirecessionary reaction ? Kazakh experience

ASTANA. January, 6. KAZINFORM. Under its rubric ?World mass-media about Kazakhstan? Kazinform offers its readers an article from the Ukrainian edition glavred.info, published on 29.12.08.

Ukraine has been the weakest link in the global crisis of modern civilization. The pace of the fall in production and our national currency are the highest in the European continent and one of the most threatening in the world. All activities aimed at stabilizing the grivna have a situational-fussy character today and duration of the effect of these activities is measured by a few days or even hours, after which the rate again returns to a state of free fall, as well as all national economy as a whole. The protest potential grows in the society. The modern form of the Ukrainian statehood faces near-term crisis. Has Ukraine had a chance to avoid the edge of this precipice? You will not believe, but the answer is positive: Yes, it had! A good example is the current state of affairs in the State which also comes from the USSR ? the Republic of Kazakhstan. A year ago this country faced the first wave of the financial crisis. It has happened because unlike most of the CIS countries, commercial banks in Kazakhstan mainly attracted funds for crediting not in the form of deposit contributions of the population, but by borrowing from foreign financial institutions. Mortgage crisis in the USA and the chain reaction to it in the world have immediately led to the outflow of capitals from Kazakhstan, reducing the liquidity of the banking system , the threat to stop lending (including mortgages), a decline in production and the rapid devaluation of the currency- tenge. Then the authorities of the country immediately adopted a number of radical measures aimed at supporting the liquidity of the banking system. Only during the August-September 2007, the National Bank allotted commercial banks with 18 billion dollars under a year rate of refinancing. Despite these inflows the banks stopped giving loans to the population. In response the Government introduced an administrative restrictions of the interest rate for mortgage crediting at16 per cent with 20 per cent of first payment. Thus the volume of lending was not to be less than 70 per cent of the total loans given to each of the banks from the National Bank in May the same year. Construction industry was saved, the economy kept positive dynamics as a whole, while the financial and banking system received a reserve of time to prepare for a new round of crisis in 2008. In the same year the gold reserve of the National Bank of Kazakhstan increased from USD 17 to 22 billion. Along with the money in accounts of the Republic of Kazakhstan the total amount of funds that may be aimed at stabilizing the economy in a global crisis, is about 52 billion dollars. It is 34 per cent higher in comparison with January, 1, 2008. In the ten months of this year, the volumes of funds on deposit accounts of the population and legal entities have increased by 22%. In November, it was decided that the total amount of means which will be allocated by the state to stabilize the economy in the world crisis, will be not less than 18 billion dollars. The structure of these investments is as follows: an increase in the capitalization of banks, providing the state guarantees that the building companies will fulfill their commitments to private investors of housing, development of small and medium-sized businesses, as well as agricultural production, the realization of infrastructure projects involving the construction of the Kazakh part of the highway West China - Western Europe, the modernization of engineering and communication infrastructure of towns. It is also planned to finance the construction of 250 schools, 200 kindergartens, 50 professional schools with modern equippment. The transfer of the capital from Almaty to Astana which took place in 1998 also stimulated the infrastructure modernization and development of construction and related industries. Certainly, the world crisis has not bypassed Kazakhstan. There is also an increase in inflation and the rise in prices. But reducing the rate of the national currency is controlled and limited and does not cause any severe panic among the population, or the entrepreneurs. Annual inflation for 2008 will be less than ten per cent. Special food stabilization funds are created to avoid sharp rise in prices of the basic foodstuff including grain. This year the Kazakh Government, for the first time, adopted the Law on State Budget for three years, 2009-2011. Legal definition of priorities for economic and social development for the three-year period will give an opportunity to local businessmen and foreign investors to plan their business for longer period. Program 2030 ? an understandable and clear strategy for economic development is consistently and persistently implemented in the country. Stability and predictability of the authorities in Kazakhstan will become an important factor for business during the crisis. Next year they (authorities) will introduce a new tax code. Its project involves radical reduction in the tax burden on non-oil-and-gas sector of economy. According to the calculations of the Kazakh economists reducing the tax burden will release about USD 35 billion. Entrepreneurs can invest this money in the development of national business. The early implementation of the pension reform has become one more factor which increases safety of the state in the new economic conditions. Even ten years ago all types of preferential pensions which were a heavy burden for the budget were eliminated in Kazakhstan. Mandatory pension payments at the rate of 10 per cent of the income of all employed citizens are kept in the retirement saving funds. Today the retirement age for women is 58 years and 62 - for men. It automatically increases labor force and reduces the strain on pension funds. Against the active attempts of the Kazakh, Russian and other countries? governments to influence on crisis processes, the Ukrainian politicians who have plunged to their hobby to charge each other, idle talk and populist appeals, look not just defenseless but also dangerous to the society. The author - an expert of the ?Gardarika? corporation