The bank, BTA, said it would pay only interest to foreign creditors, who lavished the country with loans during the commodity boom. The rating agency Fitch immediately downgraded BTA bonds to “restricted default.”
The Kazakh government had partly nationalised the bank in February, a move that was taken as a sign that the bank’s debt might be covered by a sovereign guarantee to avoid a loss of confidence in the international community, which could be disastrous.
Kazakhstan’s exponential growth during the recent oil and gas boom brought in foreign investors. Rather than raise money through deposits, banks chose in fact to borrow from international lenders, and did so excessively. Those lines of credit dried up in Kazakhstan, given the risky nature of doing business in the country, plunging it further into recession.
Controlled by Kazakh President Nursultan Nazarbayev’s daughter and son-in-law, Halyk Savings Bank, Kazakhstan’s third-largest lender, announced today that it will sell new preferred shares for US$ 642.9 million.
In order to prop up the wobbly economy Kazakhstan is spending almost US$ 15 billion or 14 per cent of its GDP on stimulus packages. But to shore up its finances the government is seeking new oil deals.
During a visit to China in mid-April, Kazakh President Nazarbayev (pictured with Chinese Premier Wen Jiabao), KazMunaiGas, the Kazakh national oil company, signed a deal giving China's main oil company, the Chinese National Petroleum Company (CNPC), a 49 per cent stake in MangistauMunaiGas (MMG), a local oil producer.
MMG has estimated crude oil reserves of 1.32 billion barrels and holds a 58 per cent stake in the Pavlodar oil refinery.
Kazakhstan holds over 3 per cent of the world's proven oil reserves.
Similarly, China's Eximbank will lend the state-owned Development Bank of Kazakhstan US$ 5 billion. China's state-run Chinese National Petroleum Company (CNPC) will in turn extend a US$ 5 billion loan to KazMunaiGas.
With the worldwide economic crisis, China can use its currency reserves, the largest in the world, to help cash-strapped commodity producers.
In Kazakhstan China already owns Aktobemunaigas, which produces 120,000 barrels of oil per day (b/d), and holds 67 per cent of PetroKazakhstan, which produces 150000 b/d.
Beijing is also an equal partner, along with the Kazakh state oil company KazMunaiGas, in the 200,000 b/d oil pipeline from the Caspian to China's Xinjiang border.