BAKU, Azerbaijan, October 26. Kazakh Parliament during the plenary sessions adopted the draft law of the Republic of Kazakhstan "On Ratification of the Loan Agreement (Loan for Financing Development Policy Based on the Private Sector and More Sustainable Economic Recovery) between the Republic of Kazakhstan and the International Bank for Reconstruction and Development (IBRD)", Trend reports citing Kazakh media.
Deputy Prime Minister - Minister of Finance Yerulan Zhamaubayev talked in detail about this draft law, while presenting it.
"In accordance with the Decree of the President of the Republic of Kazakhstan dated July 2, 2022, a Loan Agreement was signed in the amount of 345.7 million euros on August 24. The loan will be used in full to finance the budget deficit. The proceeds of the loan will help to support the accepted budget expenditures, including those aimed at social and other priority goals of the state. The loan is provided to the Republic of Kazakhstan with a maturity of 11.5 years, including a two to the five-year grace period. The interest rate is Euribor + variable spread. A one-time fee is 0.25 percent of the loan amount, reservation fee - 0.25 percent per annum," he said.
According to Zhamaubayev, servicing and repayment of the attracted loan will be carried out at the expense of the republican budget in accordance with the financial conditions established in the Loan Agreement.
Answering the questions of members of Parliament, he explained that this year the budget deficit is 3.3 percent of GDP, which is about 3 trillion tenge ($6.3 billion). Taking into account the need to service and repay previous debts, it is necessary to attract about 4 trillion tenge ($8.4 billion) from the market. At the same time, about 75 percent of the required funds have already been attracted from the domestic market.
However, the domestic market of Kazakhstan, according to Zhamaubayev is "shallow", in addition, these loans are short-term - for two to three years. That is, the Government will have to repay a large amount of debt in two to three years. Therefore, it is necessary to diversify debt. The International Bank for Reconstruction and Development (IBRD) loan is quite long-term, so even with certain currency risks, it is quite attractive.
He also noted that at present the rates on the international markets are growing and amount to four to five percent per annum for loans of similar terms. At the same time, the rate on this IBRD loan doesn't exceed 2.5 percent.