Kazakhstan to borrow US $1 billion from World Bank

By Kapiza Nurtazina
2010-01-13

The World Bank headquarters in Washington, D.C., is shown in this 2007 file photo. Kazakhstan will borrow US $1 billion in 2010 from the Bank to cover a budget deficit, but some say the loan is not needed. [Photo by Win McNamee/Getty Images]

ASTANA, Kazakhstan –The idea that Kazakhstan will borrow US $1 billion from the World Bank (WB) has drawn a variety of responses from economists.

Minister of Economy and Budget Planning Bakhyt Sultanov announced the loan December 31, 2009, and said, the money could cover part of the budget deficit in 2010 and delay the issue of foreign currency bonds. Government estimates put Kazakhstan’s budget deficit at US $4.9 billion, or 4.1 percent of the gross domestic product.

John Litwack, lead WB economist for Kazakhstan said the bank was working on a possible Development Policy Loan of as much as US $1 billion. “This loan would help Kazakhstan finance the expected budget deficit in 2010 in support of the government's economic program”, he said.

But leading Kazakh economist Olzhas Khudaibergenov doubts the loan is needed.

“For the country, which has US $ 45 billion in its National Fund, there is no need to borrow US $13 billion from China, nor US $ 1 billion from the WB. Moreover, giving the money with one hand and asking for it with the other is completely impossible to understand from the point of view of a sober economic mind”, he said.

“There is no logic in issuing bonds in foreign currency because the budget deficit — where the borrowed money will be channelled — is shaped by spending in tenge (Kazakh currency). Speaking in general, during the last two years, the government took a range of actions that are incompatible with the circumstances in the country and its needs”, he said.

But Zhanibek Khassan, a policy adviser of the Public Finance Transparency program of the Soros-Foundation Kazakhstan said, “In countries with growing and transitional economies, an evolving democratic government should have access to additional funds from international institutions. At the same time, it is critical that these loans and their uses are transparent, and the government accounts for them not only to the lender, but also to the society in general as, ultimately, it is the wider society that will be paying part of this loan back through its taxes”.

He says the loan could be justified. “Actually, the WB loan could be interesting for the government from the point of view of diversification of borrowings, interest rates, loan management and credit servicing. In this situation, it is a good opportunity to receive cheap money for a long term. The main thing is that the funding will be distributed or spent transparently, responsibly and with accountability”.

Magbat Spanov, an independent economist from Almaty said, “This once again shows that the government did not make any conclusions on the results of financial allocations during the last year. If this loan will be financing some infrastructural development programs then it could be actually taken, but if it will be directed to the current balance of payments support or social security payments then this will not be in accordance with the national interests of the country”.

Bookmarking

Please comment on this article so that we can improve the experience of viewing this website.