Kazakhstan's economy is closely tied to that of three of the four BRIC economies – Russia, China and India – so is it time to start calling them the BRICKs?

Kazakhstan is not a BRIC but it lives in BRIC country. It has common borders with Russia and China plus India is within its regional trade
orbit. This means that it does well when the BRICs do well but is also under pressure when Russia, in particular, and China face an uncertain
outlook.

This is one of those times. Under the impact of sanctions, Russia is looking at financial instability and a falling rouble and China is slowing down. A plunging oil price is an additional pressure that affects both Russia and Kazakhstan: oil and gas account for 60% of the latter's exports.

This puts the tenge, the national currency, under pressure. There is a de facto peg to a multi-currency basket and there was a substantial 19% devaluation in February. Could there be a repeat performance?

The governor of the National Bank of Kazakhstan, Kairat Kelimbetov, in an interview with The Banker, says that investors are currently making a proper distinction between Russia and Kazakhstan. "Russia is under sanctions, Kazakhstan is not. Russia has lost access to the international capital markets, Kazakhstan has this access [in October, the goverment's $2.5bn bond was oversubscribed more than four times]," says Mr Kelimbetov.

But he does accept that there is a changing macroeconomic picture. "If Europe and China slow down then the oil price will change."
The task for Kazakhstan is to continue with its reform programme and clean up the banks so that the country is more robust in the face of
any BRIC reversal.

Inflation targeting should replace the current system by 2017 or 2018, says the governor.  This will leave the valuation of the tenge in the hands of market forces and remove some of the speculative pressures.

The aim for the banks, which were hard hit by the property crash of 2008, is to get non-performing loans down to 10% by end of 2015 and to do an asset quality review, as advised by the IMF. This will be carried out by UK investment bank Rothschild next year.

Meanwhile, at least one bank, Eurasian Bank, claims the cloud over Russia is helping it to fund as investors are looking for alternatives among similar credits. This may be one advantage of living in BRIC country. It would also make sense grammatically as by adding the K of Kazakhstan BRIC could then be spelt properly as BRICK.

Brian Caplen is the editor of The Banker.

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