EBRD To Support Kazakhstan's Economic Diversification

ALMATY, Kazakhstan -(Dow Jones)- The European Bank for Reconstruction and Development, or EBRD, said Tuesday it would support Kazakhstan's economic diversification and the development of a more sustainable financial model in its new three-year strategy for the oil and gas-rich nation.

EBRD said in a statement "the medium-term growth prospects for Kazakhstan remain good" as oil production is expected to rise in the next few years and there is potential for expanding uranium, copper and grain production.

"Yet, the crisis has laid bare the imbalances of Kazakhstan's longer-term economic development, in particular the country's reliance on commodity exports and the excessive reliance of the banking system on foreign wholesale funding, and significant risks related to the banking sector's foreign exchange denominated exposures to unhedged borrowers," the bank said.

The European bank said that it would "put a special emphasis on the corporate sector by addressing immediate financing needs."

"In the financial sector, the EBRD will cooperate with the government and other international financial institutions with the view to alleviate the over- reliance of Kazakh banks on foreign wholesale funding, improve risk management practices related to lending in foreign currencies to unhedged borrowers, as well as to strengthen their capitalization, corporate governance and transparency."

The EBRD said it would also promote further modernization of Kazakhstan's energy sector and boost its support for the development of the country's infrastructure, including via the involvement of the private sector.

EBRD Web site: www.ebrd.com

-By Kadyr Toktogulov, Dow Jones Newswires; +7 701 726 4327, kadyr.toktogulov@ dowjones.com

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