Vol. 1, No. 1, January 15, 2002
Politics 
·Kazakhstan delegation travels to Afghanistan
·Kazakhstan to toughen punishments for terrorist activities
Economy
·Kazakhstan's economic growth hit record 13% in 2001
·Kazakhstan to cut interest rates, seek stability in banking sector in 2002
·Gold, metals production rise in 2001
·Net gold and currency reserves rise in 2001
·Fitch affirms Kazakhstan sovereign ratings, stable outlook
POLITICS
Kazakhstan delegation travels to Afghanistan
A delegation of Kazakhstan officials headed by Deputy Foreign Minister Kayrat Abuseitov traveled to Afghanistan this week to establish diplomatic ties with the new government in Kabul. The delegation also included representatives of the Ministry of Defense.
The key aim of the mission was to offer diplomatic support to the interim Afghan government as well as to work out plans through which Kazakhstan can supply humanitarian aid to the war-torn country.
Mr. Abuseitov met with head of the Afghan interim government Hamid Karzai and Afghan Foreign Minister Abdullah Abdullah, with whom he discussed the opening of a Kazakhstan diplomatic representation in Kabul. Following the meetings, the Kazakhstan diplomat also announced that Kazakhstan peacekeepers could be sent to Afghanistan this summer.
Kazakhstan to toughen punishments for terrorist activities
The Government of Kazakhstan has submitted a new draft law to Parliament calling for tougher punishment for "propagandizing terrorism, making public calls for the commission of terrorist acts and involvement in and leadership of terrorist groups". The draft law calls for stricter measures against extremism, separatism and illegal trade of radioactive materials.
ECONOMY
Kazakhstan's economic growth hit record 13% in 2001
The Kazakhstan economy grew by 13% year-on-year in 2001, Minister of Economy and Trade Zhaksybek Kulekeyev stated at a press conference on January 14.
Mr. Kulekeyev noted that "despite a slowdown in the world economy, we haven't observed a downward trend in the development of our economy," pointing out that Kazakhstan's gross domestic product has grown a combined 23% over the past two years.
GDP growth in 2001 was supported by a 13.5% rise in industrial production, particularly a 16.9% jump in agricultural output. The republic boasted its strongest harvest since 1991, culling 15.9 million tons of grain by clean weight in 2001, up from 11.6 million tons the previous year. The growth of small- and medium-sized business in Kazakhstan helped push unemployment in the republic down to 10.4%, from 12.8% in 2000.
Kulekeev said that maintaining the economic growth rates of the past two years would be a "hard task." In light of falling metals and oil prices, the Government and Central Bank have set the republic's GDP growth target for 2002 at a more modest 7%.
The Government expects the National Fund, which now totals over USD 1.2 B, to grow by USD 300 million in 2002. The National Fund, which collects and invests revenues generated by oil exports, could be used to cover possible budget shortfalls should oil or metals prices collapse, Kulekeyev said.
Kazakhstan to cut interest rates, seek stability in banking sector in 2002
The National Bank of Kazakhstan expects a further lowering of a key interest rate and greater stability in the republic's banking sector, National Bank Chairman Grigoriy Marchenko disclosed at a press conference in January 9. Calling the year 2001 "the most successful one ever for Kazakhstan's financial system", Mr. Marchenko noted that some segments of the financial sector grew 50-70 percent or even doubled last year, Reuters reported.
The total assets of Kazakhstan's 44 domestic banks grew by 43.6% in the first eleven months of 2001 to top USD 5.1 billion in December. Total shareholder capital in the banking system reached USD 809 million, a rise of 23.1% over the same period of 2000.
Mr. Marchenko said that the current key re-financing rate, which was slashed several times in 2001 to fall from 13.5% to 9% in 2001, would likely to be cut again in 2002. The central bank chief emphasized that this move would be made with the expectation that local banks would then cut interest rates on loans to the economy as the repulic braces for a slower pace of growth in the coming year.
Consumer price inflation fell to 6.4% in 2001 from 9.8% the previous year. The national currency lost just 3.8% of its value against the dollar last year, better than expected, Mr. Marchenko noted.
Gold, metals production rise in 2001
Gold production in Kazakhstan grew by 43.8% year-on-year in 2001 and totaled 16,569 kilograms, the National Statistics Agency announced on January 14. Production growth of most metals was more modest than gold, with silver output up 5.4% to 943,006 kilograms on the year; zinc production rose 5.5% to 276.9 tons, while copper was up 6.8% to 421.755 tons. The smallest increase concerned alumina, output of which rose 1.2% to total 1.231 million tons.
Net gold and currency reserves rise in 2001
Kazakhstan's total international reserves, which includes the gold and forex reserves as well as the National Fund, rose by 79% in 2001 to total USD 3.748 billion, the National Bank announced. The reserves of the National Fund stood at USD 1.24 billion as of the end of 2001. The National Fund, which was established in early 2001 and accounted for the bulk of growth in the republic's international reserves this year, accumulates excess tax revenues from projects developing Kazakhstan's vast subsurface resources.
Kazakhstan's net gold and foreign currency reserves rose by 19.7 %, or by USD 411.6 million last year to total USD 2.505 billion.
Fitch affirms Kazakhstan sovereign ratings, stable outlook
London-based international rating agency Fitch has affirmed Kazakhstan's long-term foreign and local currency ratings at 'BB' and 'BB+', respectively, as well as its short-term rating of 'B', the agency announced in a press release on January 14. The outlook on the long-term rating is stable.
According to the Fitch press release, the agency believes that "despite lower oil prices this year, Kazakhstan will continue to prove its solid 'BB' credit status." The agency noted that the economy remains vulnerable to oil price fluctuations, but argued that structural changes such as the establishment of the National Fund and the completion of the Caspian Pipeline Consortium network should offer protection from oil price declines. Meanwhile, new discoveries and investments in the hydrocarbons sector raise the prospect of sizable output gains from 2005 onwards, helping to close current account shortfalls and reinforcing the net external creditor status of the public sector.
Further support to the ratings is provided by the developing financial system, in particular the pension reforms started in 1998. Reform has reaped benefits by limiting the fiscal implications of the previous system, stimulating growth in domestic capital markets and providing a near-captive market for Government paper. Pension funds hold nearly half of the outstanding stock of sovereign eurobonds, and demand for new Government paper remains strong, providing the authorities with a relatively easy means of debt refinancing, at lower costs than might otherwise be the case.
Though "it seems likely that the authorities will be tested through 2002," the economy is now in a stronger position to weather external shocks than was the case during the last oil price fall in 1998, Fitch stated. Fitch called the overall political situation in Kazakhstan "stable" and said the Government's commitment to economic reform was "not in doubt."
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News Bulletin of the Embassy of the Republic of Kazakhstan
(Compiled from own sources and various agencies' reports)
Contact persons: Roman Vassilenko, Aibek Nurbalin
Tel.: (202) 232- 5488 ext. 104, 115
Fax: (202) 232- 5845
