Ben Aris in St Petersburg -

First in, first out. As the storm clouds gathered in 2007, Kazakhstan was the first country in the former Soviet Union to suffer from the shockwaves spreading out from the US sub-prime mortgage crisis that built into a global storm a year later. And the Eurasian Development Bank, set up by the governments of Russia and Kazakhstan as a sort of IMF-cum-EBRD of the east and tasked with fermenting mutually beneficial investments into things like cross-border infrastructure, found itself on the frontline.

From his base in Almaty, Igor Finogenov, chief executive of the EDB, has had a ringside seat to the Kazakh travails of the last two years. The seizure of BTA Bank by the state and the subsequent freeze on the bank's debt made headlines around the world, but the republic's rapid return to health has generated less column inches. "Kazakhstan was the first into the crisis and now it is the first coming out. The beginning of the crisis in Kazakhstan was marked by the downturn of external debt channels, decrease of the export growth rate and by the mortgage crisis. All these then resulted in decline of the industry sectors growth rate. The prompt adoption and implementation of the anti-crisis program in Kazakhstan mitigated to a great extent the negative influence of the crisis in this country," Finogenov told bne during the Russian Economic Forum in St Petersburg in June.

Kazakhstan was one of the hardest hit by the international crisis of all the countries in the Commonwealth of Independent States (CIS). The assets of the banking sector were growing at over 200% in the last few boom years as consumer credit exploded, which in turn fuelled a real estate bubble, but this heavy international borrowing made the country the most exposed of all CIS countries to the vagaries of the global credit markets. "It was the newest branches of the Kazakh economy that were hurt the most - real estate and finance. Post-crisis, the economy is now being driven by the traditional pillars of the economy - oil and metals," says Finogenov.

Happily, the National Bank of Kazakhstan managed to avoid panic amongst the population by rapidly expanding the deposit guarantees. The result is that while the banks have been wounded, they still have the same deposit base as before, which is a solid foundation on which to rebuild their businesses. "The Kazakh depositors were not very frightened by the crisis, as they believed the government and the regulator when they promised to protect their savings," says Finogenov. "This more than anything helped to avoid a panic and stave off runs on the banks that would have destroyed their deposit base. Now deposits are big and the main source of funds. It means the banks can grow, albeit at a slower place than before."

Finogenov says that now the economy is coming out the other side of the crisis, corporate deposits are also beginning to recover on the back of rising oil and commodity prices, but the key event for the markets has been the restructuring of BTA's debt.

Once the biggest bank in Kazakhstan, BTA collapsed during the crisis in a swirl of corruption allegations. But after being taken over by the state (it's due to be sold to Russia's Sberbank later this year), the bank has restarted lending and is now the third-biggest lender in the country. "The Kazakh capital market reopened after the BTA deal," says Finogenov. "Before that, banks were dependent on either the national budget or their private deposits."

Anti-crisis fund

More recently, the EBD has found itself even closer to the action after it was appointed the manager of the Eurasian Economic Community (EurAsEC) Anti-crisis Fund.

In mid-June, the EDB granted its first loan of $70m to Tajikistan under a yearly interest of 1% for 20 years with a five-year grace period. Belarus, which became the latest country to join the capital EDB also in June, is also thinking about applying for funds from the bank. And the bank is still growing; it recently signed off on deals to expand its operation in Russia, Ukraine and Mongolia. "We are following the shareholders who have business in these countries," says Finogenov.

While most of the banks in the CIS are struggling, ironically the crisis has actually boosted the EDB's profile, which is supporting the bank's expansion.

The projects include the modernisation of Kazakhstan's Ekibastuz GRES-2 power plant, the creation of Russian regional passenger aircraft Sukhoi SuperJet 100, the construction of an interregional power transmission line in Kazakhstan, the construction of a railroad car production facility in the city of Tikhvin in the Leningrad Region, and the upgrade of a thermal power plant in the city of Argun in the constituent republic of Chechnya, Finogenov says. The plan is to increase the bank's commitment to its customers this year and increase the total loan book from $1.6bn in 2009 to over $2.2bn this year.

The Russian government's successful Eurobond issue in May has proved to be a boon for the EDB, as it set a new benchmark for interest rates and lowered the bar for quasi-state issuers like EDB. As the bank is not allowed to take in retail or corporate deposits, its main sources of funding are the capital markets by issuing bonds or signing bilateral deals. "There is money there available if we want it and following the Russian sovereign deal, it is much cheaper than before," says Finogenov.