Founder and CEO of Freedom Holding Corp. Timur Turlov attended the First Kazakhstan Economic Freedom High-Level Conference in Astana where he spoke about the National Bank and its base rate role in the Kazakhstani economy. Turlov believes that the current rate level significantly hinders credit activities and business development, yet it is convenient for banks.
«I hope that reducing food inflation amid the Russian ruble devaluation enables the National Bank to respond more actively to inflation reduction. The truth is that real interests aren’t the highest in the world but are still relatively high. The rate we have is a constraint indeed,» Turlov said.
The CEO of Freedom Holding Corp. explained that if a Kazakhstani company takes out a loan for around $208,000, the overpayment would be around $37,400 a year. In contrast, for the same loan taken in China, the overpayment would be just about 6%. According to Turlov, this situation has led to a steady decline in corporate loans over recent years, which he described as a «big problem for corporations.»
While high interest rates are profitable for banks, allowing them to earn more from net interest income, the downsides ultimately outweigh the benefits, Turlov concluded.
As of today, the National Bank’s base rate is 14.25%. At its last meeting in late August, the regulator decided to keep the rate unchanged. Nevertheless, the central bank had softened its monetary policy amid an inflation slowdown earlier this year. By the end of August, year-on-year price inflation was at 8.4% in Kazakhstan, down 0.2 percentage points from July.
