IMF urges Kazakhstan to bolster reforms for faster growth

ALMATY: The International Monetary Fund on Tuesday cut its economic growth forecast for oil-rich Kazakhstan this year, partly due to the slump in global crude prices, and urged the government to press ahead with promised structural reforms.

Central Asia's largest economy is facing weaker demand at home and abroad, especially from Russia, China and Europe, and continued regional uncertainty linked to the Ukraine crisis as well as falling oil prices, a visiting IMF mission said.

The IMF trimmed its 2014 growth forecast for Kazakhstan to 4.3 percent from 4.6 percent, down sharply from 6.0 percent in 2013. It said growth could reach 4.5 percent next year and 5.5 percent in 2016, provided reforms are pursued.

"Risks to the outlook are predominantly on the downside, mostly related to oil prices and regional uncertainty," it said in a statement.

Kazakhstan is the second largest post-Soviet oil producer after Russia, but output is likely to slip this year from 81.7 million tonnes in 2013 due to stalled production at Kashagan.

The giant offshore oilfield had originally been forecast to add 8 million tonnes of crude to national oil output in 2014. But it was halted just a few weeks after its launch in September 2013 after gas leaks were detected in its pipelines and is not expected to resume operations until the second half of 2016.

Seeking to stimulate growth in the $230 billion economy, President Nursultan Nazarbayev ordered the government last month to allocate $3 billion every year from 2015 to 2017 to support large-scale infrastructure projects.

This financial stimulus from the National Fund, which collects windfall oil export revenues, is sorely needed while Kashagan stands idle.

Coupled with financial support to be provided by multilateral development banks, the financial stimulus could amount to up to 7 percent over the next 3-5 years, the IMF said.

Apart from modernising infrastructure, reforms should improve the business climate and creating jobs, it added.

Strengthening fiscal policy remains a priority, the Fund said, while hailing the Kazakh central bank's plans to adopt inflation targeting in the medium term.

The IMF urged Kazakhstan to "follow through expeditiously" with plans to cut the share of non-performing loans in its banking sector to 10 percent by end-2015. NPLs are 27.6 percent of Kazakh banks' total loan portfolio, official data show.