Kazakh National Bank reports on financial stability for 2021

The financial regulator pointed to a chronically high gap between budget expenditures and non-oil revenues
Фото: kapital.kz 05.08.2022 203

Chairman of the National Bank Galymzhan Pirmatov held a meeting of the Financial Stability Board. . It was attended by First Deputy Head of the Presidential Administration Timur Suleimenov, Deputy Prime Minister - Minister of Finance Yerulan Zhamaubayev and Chairman of the Agency for Regulation and Development of the Financial Market Madina Abylkassymova, El.kz reports with reference to the National Bank of Kazakhstan.

At the meeting of the Council, the conclusions of the Financial Stability Report for 2021 with the results of a comprehensive analysis and assessment of the main risks and vulnerabilities of financial stability were considered and approved.

According to the report, the easing of quarantine restrictions in 2021 contributed to the growth of business activity and had a positive impact on the prospects for economic growth. However, incomplete supply chain recovery and high energy prices have led to inflationary pressures. As a result, the global challenges have been the tightening of monetary policy in developed economies, the increase in the level of sovereign debt and the budget deficit.

The main risk factor for fiscal policy remains the imbalance in public finances. This is reflected in the chronically high gap between budget expenditures and non-oil revenues. With the fall in oil prices at the end of 2014, the period of accumulation of super profits from the oil sector was interrupted, which has long led to a decrease in the net assets of the Government. At the end of 2021, net assets have already reached minimum values in relation to GDP (10.2% of GDP - net assets of the Government, 4.8% of GDP - net assets of the state).

In order to improve the balance and sustainability of public finances, it is important to adhere to the fiscal rules included in the Budget Code. They will ensure the safety of the assets of the National Fund and restrain the excessive growth of budget expenditures.

At the same time, in 2021, the lending activities of financial institutions intensified against the background of a revival of economic growth after COVID-19. The growth of the loan portfolio of banks by 27.9% is mainly due to the issuance of new loans to individuals (40.9%) and SMEs (29.2%). The quality of banks' loan portfolios has improved markedly in both corporate and retail portfolios.

At the same time, due to the increased vulnerability of enterprises in the real sector, especially after the COVID-19 period, the risks of a decline in the quality of the corporate portfolio remain elevated. At the same time, the high growth of the retail portfolio can also lead to risks in the event of a deterioration in the economic situation in the country.

One of the important creditors of the economy, in addition to the banking sector, are microfinance organizations (MFIs, credit associations and pawnshops), which entered the regulatory perimeter from 2021 in order to reduce risks in the non-banking sector, increase its transparency and protect the rights of consumers of financial services.

The level of dollarization of deposits in 2021 decreased from 39% to 37% compared to the level of 2020. This year, this process continued (in May - 33%).