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Jon Hellevig: “Instead of bailing out banks and oligarchs, Kazakhstan will write off loans of the poor. This has been announced by new Kazakh president Kassym-Jomart Tokayev. There’s an unexpected corner of the world from where sound and fair financial policies emanate!
Doing this President Tokayev is actually reviving an ancient traditions of cancelling debts when a new ruler took over going back to Hammurabi, the Sumerians and other Near Eastern rulers. Michael Hudson has written a book called “And Forgive their Debts” depicting this story from Babylonia and to other Bronze Age Near Eastern realms.
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Forgiving of debts was also in ancient Greece and Rome an important policy goal in the fight against the oligarchs. Should become again.”
The loan-forgiveness program is Tokayev’s first major policy announcement since he was elected president on June 9 in a choreographed transfer of power that began when longtime leader Nursultan Nazarbayev stepped down as head of state in March. His victory was met with rare and widespread protests.
Bank bailouts are also a sensitive issue in Kazakhstan, which has been mired in a decade-long crisis in which the government has pumped at least $18 billion into lenders to keep the sector from collapsing under the weight of bad debts. The central bank is conducting a review of asset quality, prompting speculation that a new round of bailouts may be in the works.
“My attitude is that there should be no governmental bailouts” for lenders, Tokayev, 66, said in an interview Tuesday in the capital, Nur-Sultan. “My assessment of this issue as a president is that the government should not get involved any more, any longer, with its loans as far as private banks are concerned.”
While the debt-relief initiative may help lenders, the total cost is likely to come in at “a bit less than $1 billion,” according to Tokayev. More than 3 million Kazakhs in the energy-rich country of 18 million will get help to escape debts averaging 300,000 tenge ($790), he said. It is aimed at “people who find themselves in very difficult living circumstances,” he said.
About 4,000 people were detained by police during a rare outburst of protests against what activists said was a lack of real choice in the recent vote, which Tokayev won easily with 71% support. Leader-for-life Nazarbayev, 78, handed the presidency to Tokayev in March, who called the early election “to remove any uncertainty.” International observers criticized the conduct of the vote.
The new president’s debt forgiveness program is similar to a controversial policy unveiled by Georgia’s ruling party, which announced the write-off of loans for 600,000 people days before a hotly-contested presidential election won by its candidate in November. “We are not following the example of Georgia, this is a different case” focused on the poorest citizens, Tokayev said.
Nazarbayev berated ministers as “cowards” in January for failing to clean up the banking system, shortly before he dismissed the government and replaced the central bank governor. Yet the biggest bank rescues have involved people close to the former president’s inner circle.
While Tokayev denied that political connections played a role in past bailouts, “the lesson has been accepted by us,” he said. “We will take lessons from the past, from what has happened in the banking system, and I think that in a couple of years you’ll have absolutely new questions.”