Kazakhstan to boost liquidity at major banks

ALMATY, Kazakhstan. January 27. (AP) The Kazakh government will deposit $1 billion in each of two leading banks as part of efforts to restore liquidity to the country's troubled lending sector, the country's prime minister said Tuesday.

Kazakhstan, the largest economy in Central Asia, has endured a severe liquidity crisis over the past year with inflows of foreign capital drying up as the global credit crunch unfolded. Under its anti-crisis program, the government has proposed to boost capital at four major Kazakh banks by up to $5 billion using money from Samruk-Kazyna, a state holding company recently created by the merger between the national development fund and the state assets management company. The government will retain full control over the use of the money being deposited at Kazkommerzbank and Halyk Bank, the second- and third-largest banks in Kazakhstan respectively, Prime Minister Karim Masimov said. Samruk-Kazyna will gain a 25 percent stake in each of the banks as part of the deal. The banks have no money of their own to pass on to customers because they are exposed to foreign debt that they are gradually paying off. By depositing cash, the government aims to ensure local lenders can get money back into the local economy. © 2009 The Associated Press. All rights reserved.