AKIPRESS.COM - Despite state support, the banking sector remains weak, with high levels of bad loans, the International Monetary Fund reported after the team met with Kazakh authorities and discussed economic issues. 

The plan to conduct an external asset quality review (AQR) of medium and large banks is commendable and should set the basis for the long-awaited strengthening of the sector. Clear communications will be needed, along with comprehensive measures to ensure strong balance sheets and profitable and sustainable operations. The AQR may reveal the need for additional capital; any public support should be provided only to systemically-important and viable banks, subject to contributions from existing shareholders, and in the view of the IMF staff, from the budget and not the NBK.

The IMF said it supports priority areas identified during the discussions: increasing competition, productivity, and development of non-extractive sectors, greater regional integration, improving business conditions to encourage entrepreneurship and investment, enhancing the efficiency of public administration and governance, adjusting revenue-sharing arrangements with regional and local governments, and improving health and education policies.

The team also promises to strongly support the authorities’ efforts to advance reforms and tackle inequality. Social-support initiatives in the revised 2019 budget will provide temporary relief, but for a durable, sustained impact underlying structural constraints that limit emergence of a thriving private sector need to be addressed, particularly in the banking sector.