Kazakhstan needs to resolve problems in its banking sector to restore economic growth and can consider a more flexible exchange rate after that, the head of the fund's mission to the country said.
“Certainly, the policy package that has been put in place is a good one, it's moving ahead, but we do see the need to really focus on the financial sector, strengthen the financial sector,” IMF's Tim Callen told a briefing.
“That's going to be critical for helping growth to pick up into the next year.”
Two of Kazakhstan's top banks, BTA and Alliance are in talks with creditors to restructure their debt. Both have said they expected asset writedowns.
“If we don't get a clear resolution of the banking problems, that is going to be negative for the outlook,” Callen said.
The IMF said in April it expected Kazakhstan's economy to shrink by 2% this year. Kazakhstan devalued its tenge currency in February by about 18% and has vowed to keep it stable in the medium term.
“Certainly, for the time being while working through the problems in the banking sector having the stable exchange rate is very important,” Callen said.
“If we are looking beyond the period of stress in the financial sector we would still be suggesting more flexibility in the exchange rate. Now is certainly not the time to move that way.” (Reuters)