2012 inflation forecast unchanged, National Bank chief says

According to Marchenko, in 2011, annual inflation was 7.4% while in January 2012 its rate in annual terms constituted 5.9%, the lowest since November 2009. The mid-term inflation corridor is forecast in the range of 6-8%.

Starting from February 14, given the trends in the financial market and the slowdown in the annual inflation rate, the National Bank reduced the official refinancing rate from 7.5% to 7% per year.

"To date we have remained within the corridor. Inflation stayed within the corridor, but in its upper part. If this year inflation keeps in the lower part of the forecast corridor amounting to 6.2-6.3%, it would be very good. After that we could review the forecast for future years," Marchenko said at the press conference, the Kazah MFA said.

Marchenko reminded that during the last 12-13 years, an average inflation was 7.3-7.4%, except for the period of 2007-2008, when it rose sharply because of the substantial increase in prices for food and energy on foreign markets. He also noted that if the rate of inflation remains low, the refinancing rate may be reduced once again in April.

"If the inflation decreases from its long-term level of 7.3% to a long-term average level of 5-6%, our country will benefit from it," he added.

Asked whether implementation of major industrial and innovational projects would entail borrowing from the National Fund of Kazakhstan as mentioned by President Nazarbayev in his state-of-the-nation address, Grigory Marchenko said borrowing from the National Fund for the implementation of the projects would be optimal in the framework of public-private partnerships (PPPs), where the main financial burden is placed on strategic investors.

"From our point of view, public-private partnerships that we have been discussing over the past three years would be the best mechanism," Marchenko said. According to him, almost all the projects that involve the use of the National Fund assets have strategic investors, including those from South Korea, China, and Russia, who should take on a major part of the investment burden.

"The optimal structure is when the strategic investor provides 51-60% or more for the funding of the project, about 20% could be borrowed from the National Fund, and the remaining funds could be attracted by issuing special bonds to pension funds guaranteed by the state," he said. The head of the National Bank believes such a mechanism would make the process of spending the National Fund assets more transparent.

"Our position is that there must be some medium-term programme, but a large bulk of investment should not be provided by the National Fund or from the budget, but by strategic investors. This process can be better controlled when assets of both the investors and the National Fund are involved," Marchenko stressed.

The National Bank manages the assets of the National Fund that accumulates extra revenues caused by high market prices for commodities exported by the country.

According to preliminary data, as of February 1, the country's international reserves, including the National Fund assets amounting to US$ 45.5 billion, stood at US$ 78.7 billion.