ASTANA – The Asian Development Bank (ADB) and the World Bank have proposed establishing a municipal infrastructure fund in Kazakhstan. ADB intends to facilitate financing small utility companies in the state, said bank representation director Giovanni Capannelli at a Central Communications Service briefing.
“We, together with the World Bank, propose to create a municipal infrastructure fund. Until now, our main problem was the creditworthiness of small-scale utilities at the level of cities and settlements to obtain our financing, our investments. Other international financial institutions provided certain types of financing to utilities in the region, but interest rates were quite high and this creates problems on the way forward in terms of fiscal sustainability. Therefore, now we are discussing the creation of a municipal infrastructure fund in the government, because that’s how we can alleviate certain conditions, especially in the financial part,” he said.
He added ADB is interested in determining a way to grant financing in tenge, which is important since purchases are made in local currency. In February, a $20 million repurchase (repo) agreement was signed with Kazakhstan’s National Bank to be used for projects in the near future. Issuing bonds in tenge will also be discussed.
Capannelli added ADB plans to provide financing for sovereign (governmental or state-guaranteed) and long-term projects for up to 25 years at the Libor rate +50 base points, with LIBOR being around 1.4-percent. The bank will be creating a special mechanism to finance in tenge, where sovereign conditions will be combined with non-sovereign ones and the government can only be asked to give support to a certain share of the project. Instead of the 14-15 percent rate, as in the market, the bank will be able to provide a special rate for concessional financing. Detailed conditions will be arranged for each specific project.
ADB, established in the early 1960s, was created to boost economic growth and cooperation in developing countries. The bank assists its members and partners, providing loans and technical assistance, grants and equity investments to promote social and economic development. ADB is composed of 67 members, 48 of which are from the Asia and Pacific region.