Kazakhstan replaces central bank governor

By bne IntelliNews October 2, 2013

Clare Nuttall in Astana -

Grigory Marchenko has suddenly been replaced by former deputy prime minister Kairat Kelimbetov as governor of the National Bank of Kazakhstan (NBK). The unexplained move, announced on October 1, comes four years into the second term of the respected Marchenko, and just ahead of the central bank's takeover of the country's pension assets.

A statement from the presidential press office said Marchenko has been relieved of his post at the bank for "family reasons". No further explanations were offered for the dismissal of Marchenko, who returned to the post for a second time in 2009 during the depths of the recent financial crisis.

"He has worked in this capacity for many years, including through the difficult years," President Nursultan Nazarbayev said in a statement published on the Akorda.kz website. "He has made a great contribution to the development of the financial system of our country, to the work of the National Bank and management of the National Fund, for which I am grateful to him."

The bank's policy "will not change" as a result of the handover to Kelimbetov, the statement added.

Marchenko first headed the central bank between 1999 and 2004. He was later moved to become deputy PM, then left to join the private sector where he was CEO of Halyk Bank, currently Kazakhstan's largest bank by assets.

However, he was brought back to lead the central bank again in early 2009 when Kazakhstan faced a severe financial crisis. His first act on taking over was to devalue the tenge by 18%. This was followed just days afterwards by the nationalisation of two of Kazakhstan's largest banks, BTA Bank and Alliance Bank. Since then, Kazakhstan's economy has returned to steady growth, and the stability of the tenge has been maintained.

Marchenko has pushed to expand the NBK's powers during his second term. After presidential elections in April 2011, the financial regulator (AFN) and the Agency for Regional Financial Centre of the City of Almaty were both abolished by presidential decree, and all functions and powers transferred to the central bank.

The departed governor has also continually called for full independence for the central bank. "Ideally, the National Bank of Kazakhstan should be independent, and there are no 'ifs'," he stated in March.

Indeed, in June parliament approved plans to give the bank more independence in certain areas, including giving it priority rights to buy gold bullion

Marchenko was respected within Kazakhstan and popular among foreign investors, especially in the immediate neighbourhood. Two years ago - with Russia leading a push to expand the influence of the BRIC economies in international institutions - he was nominated as the CIS candidate to head the International Monetary Fund following the resignation of Dominique Strass-Kahn.

Critical time

His replacement Kelimbetov has held several high-level government positions including minister of economy and budget planning, and deputy chairman of Kazakhstan's sovereign wealth fund Samruk-Kazyna. He has clashed more than once with Marchenko over Kazakhstan's reform agenda in recent years.

The president offered little detail on why Kelimbetov has been appointed. "I consider that his knowledge of Kazakhstan's economy and financial situation will have a positive impact on the work of the National Bank," Nazarbayev's statement said curtly.

The change of leadership comes at a critical time for the NBK, which is in the process of taking over Kazakhstan's pensions system. Under plans pushed by Marchenko and announced at the beginning of 2013, the country's ten private pension funds will be merged with the state fund. The resulting "GNPF Accumulation Pension Fund" will add $23bn to the NBK's overall assets of $120bn - equivalent to 60% of GDP, Marchenko said in an interview with Reuters last month.

As in many CEE states struggling through years of economic hardship and fiscal difficulties, the government in Kazakhstan has shown enthusiasm for getting its hands on those private pension funds. Nazarbayev says collecting pension assets into a single, state-run fund will allow the government to mobilise billions of dollars for large projects to help sustain growth.

The president is pushing huge investment in infrastructure, both to help the economy and stem growing disillusionment amongst the population with the system. The biggest gripe is that the country's growing oil and gas wealth does not make it far out of the major cities.

Analysts suggest that despite the pledge that policy will not change under Kelimbetov, the GNPF is likely to raise its investment in infrastructure projects. Marchenko had said he planned to raise the ratio of pension assets invested abroad, and warned that any large-scale state projects must be subject to strict expertise and be profitable.

Nazarbayev has set a deadline for the pension fund merger of January 1, 2014. However, Marchenko told Reuters in September that it is not certain the process will be completed by the end of the year. In June, Nazarbayev criticized the NBK for its role in a plan to make the retirement age equal for men and women, calling its work "unsatisfactory."

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