Agreement between National Bank and Government: 10 main measures on macroeconomy policy for 2019
“To implement the instructions of President Kassym-Jomart Kemelevich Tokayev on realisation of the strategic initiatives and structural reforms of the First President – Elbasy, Nursultan Nazarbayev, the National Bank undertakes initiatives to conclude an agreement to coordinate measures on the macroeconomy policy for 2019 with the Government. The agreement sets the main directions on joint work of the Government and the National Bank to ensure sustainable economic growth, to keep the stable level of prices,” said the National Bank Chairman, Yerbolat Dossayev.
It was said the agreement aims at ten main directions.
“The National Bank will keep the inflation targeting regime, emphasizing on sustaining low inflation, economic development sustainability and growth in the population’s living standards, in so doing, inflation targets are being defined. It is proposed to retain the corridor of 4.6% until 2021, and beginning with 2022 to reduce it to 3.5%, with further maintaining it. The National Bank will attempt to retain the level of base rate within 3-3.5% in real terms. In the event of deviations of inflation from the targeted corridor, the fiscal policy could be tightened,” he said.
To ensure the FX market’s stability, the National Bank sets a task to increase the predictability to changes in the rate of the tenge. While maintaining the policy of non-intervention in foreign currency auctions, the National Bank keeps the right to conduct smoothing interventions. Frequency and transparency of the information on scheduled actions to purchase or sell foreign currency by the National Fund and quasi-sector facilities will give stability to the FX market.
The Chairman also spoke of the adoption of measures to develop the market of financial derivatives as the main means for hedging currency exposure.
“Fourth task - accessibility for funding the economy. The great attention will be attached to develop a market of institutional investors of time and savings deposits. In order to increase the efficient pricing, market indexes and indicators in the interbank market and the securities market will be achieved. The National Bank will ensure the formation of a short-term risk-free yield curve. We ask the Ministry of Finance to reduce and consolidate the insurance of securities to form mid- and long-term segments of the yield curve. Work will be carried out to include government securities into the international global indexes of emerging countries, which will help to attract foreign investments and to reduce borrowing costs,” he said.
Speaking of the national financial support programmes to develop the economy, the main role belongs to the Government, while the National Bank will focus on implementing three programmes. As for the 7-20-25 programme [housing programme], the National Bank will continue funding the programme under the previously approved terms. Regarding the programme, it has been said to propose to give the borrower a down payment of over 20%, and to expand the number of banks involving in the programme. Utilization of the long-term liquidity of KZT600bn by the banks will allow to timely credit the economic priority projects. At the moment 9 banks partake in the credit programme; three banks’ obligations for KZT112bn have been acquired. To carry out the programme to provide loans to buyers of locally manufactured cars, the National Bank will allocate up to KZT100bn in five years, with KZT20bn will be allocated this year.
“As for the seventh task, which is to recover the real sector’s facilities, the realisation of the priority right of secured creditors will underpin the enterprises’ recovery and the banks’ loan portfolios. Work will continue to establish the enforcement practices in bankruptcies with highest judicial authorities,” he said.
“Eight – the financial system’s sustainability. We are to keep on working on strengthening the banking system, with the full realisation of the creditor’s functions as the final body will be crucial. Work has started to carry out risk-orientated monitoring, which will help to reveal the banks with inadequate capital and to conduct primitive steps in the early stage. Ninth – to reduce the hidden economy and to develop non-cash payments, the measures will be continued to increase the affordability of non-cash payments and to improve their infrastructure. Measures to switch payments on big deals to non-cash form will be undertaken. Tenth - to protect the customer rights and to increase the financial literacy, amidst the increasing risks, suggestions to regulate the banking credit organizations such as credit associations, online creditors and pawn shops will be considered for the population in the consumer credit field. The requirements for transparent terms will be amplified, as well as the consumer rights protection, in particular, that of socially vulnerable layers of the population,” said the Chairman of the National Bank of Kazakhstan.
The said measures are said to increase the population’s awareness and literacy, protecting them from increasing risks in the field of consumer credits.
“To implement the said measures, the National Bank will put forward the following proposal to introduce legislative amendments, including expansion of the National Bank’s mandates, to the Government. The agreement is not limited by the said directions of the National Bank and the Government’s joint actions. Coordination will be ensured by regular monitoring,” he concluded.