World Financial Turbulence Could Hit High-Risk Kazak Lenders
World Financial Turbulence Could Hit High-Risk Kazak Lenders
As the panic continues across international stock markets, NBCentralAsia analysts are warning that Kazakstan’s financial sector and wider economy are vulnerable. Kazak banks are over-extended with high levels of borrowing abroad and a lot of risky lending at home.
NBCentralAsia commentators see some similarities between conditions in Kazakstan and the mortgage crisis in the United States which has sparked the market turbulence.
Kazak banks have high levels of external indebtedness, and have used the money they raised in this way to offer their domestic customers mortgages and consumer loans. NBCentralAsia economic observer Petr Svoik explained that the banks borrow from financial institutions in Europe which offer low interest rates.
The banks currently owe 30 billion US dollars to foreign creditors, of which two billion dollars is now due, according to the posit.kz web publication.
The consequences of this strategy could be felt sooner rather than later as the first repayments on these Kazak mortgages are beginning to fall due.
Svoik says it is too soon to worry about a major crisis, but the preconditions for it are certainly there.
The mortgage and consumer lending sectors are poorly protected from the possibility that borrowers will default. “While people take out a mortgage in the hope that they'll be able to pay it back, this does not always happen,” said Svoik. “As it is now beginning to be time to repay these mortgage loans, there are indications that the first crisis is on its way. And of course the numbers won’t add up.”
A banking crisis, if it happened, would affect virtually all sectors of the Kazak economy, Svoik believes. Most of the revenues from sales of oil and non-ferrous metals – the bedrock of the economy – are invested in the banking system.
Political analyst Eduard Poletaev is more confident. He believes crisis can be averted, because Kazakstan’s political elite is well aware of the effect a financial crash would have on both economic and social stability, and will take action to prevent it.
“No one wants this crisis to happen, so they will take a range of measure to stop it even starting,” he said.
Poletaev noted that a number of senior government officials have already spoken of the risks posted by borrowing abroad, and he believes these statements may be followed up by tougher restrictions on such transactions.
(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)
NBCentralAsia commentators see some similarities between conditions in Kazakstan and the mortgage crisis in the United States which has sparked the market turbulence.
Kazak banks have high levels of external indebtedness, and have used the money they raised in this way to offer their domestic customers mortgages and consumer loans. NBCentralAsia economic observer Petr Svoik explained that the banks borrow from financial institutions in Europe which offer low interest rates.
The banks currently owe 30 billion US dollars to foreign creditors, of which two billion dollars is now due, according to the posit.kz web publication.
The consequences of this strategy could be felt sooner rather than later as the first repayments on these Kazak mortgages are beginning to fall due.
Svoik says it is too soon to worry about a major crisis, but the preconditions for it are certainly there.
The mortgage and consumer lending sectors are poorly protected from the possibility that borrowers will default. “While people take out a mortgage in the hope that they'll be able to pay it back, this does not always happen,” said Svoik. “As it is now beginning to be time to repay these mortgage loans, there are indications that the first crisis is on its way. And of course the numbers won’t add up.”
A banking crisis, if it happened, would affect virtually all sectors of the Kazak economy, Svoik believes. Most of the revenues from sales of oil and non-ferrous metals – the bedrock of the economy – are invested in the banking system.
Political analyst Eduard Poletaev is more confident. He believes crisis can be averted, because Kazakstan’s political elite is well aware of the effect a financial crash would have on both economic and social stability, and will take action to prevent it.
“No one wants this crisis to happen, so they will take a range of measure to stop it even starting,” he said.
Poletaev noted that a number of senior government officials have already spoken of the risks posted by borrowing abroad, and he believes these statements may be followed up by tougher restrictions on such transactions.
(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)
