Financial Crisis in Central Asia: Year in Review

Today, in the second part of our Central Asia: Year in Review, we will discuss the global recession's impact on our region.

A couple weeks ago, I went over Kazakhstan's sickening economy and their government's early efforts to stem the tide, while at the same time drawing a connection to how Kazakh and the rest of the globe's financial crisis was effecting the smaller CA states.  The news now is that the situation is getting worse for all the CA actors involved.

With oil and gas prices plummeting because of declining demand Kazakhstan has already had to revise its budget.  It's budget was set at what was thought to be a cautious $60 per barrel projection, and while this was a dream during the last few years, it has now become a nightmare as oil is currently selling around $54 per barrel.  The Kazakh prime minister has ordered the recalculation for 2009-2011 budget, setting the price at $40!  Who would have thought that two years ago.  This drop in oil and gas revenues has not only played havoc on the government budget, but also on the country's once thriving construction and banking industry, which have both sprung to a halt, bankrupting many citizens.  People who have bought apartment buildings yet to be made, now fear that they will never rise.  Citizens are having to sell all their positions just to keep a roof over their head as banks have come calling for payments, as they themselves struggle to stay afloat, and many are not.  As public anger grows, President Nazarbayev and his government are doing whatever they can to blame outside financial forces for the tremendous slowdown, as they fear greater unrest and instability.

In many ways in Central Asia, as goes Kazakhstan, Russia, and China, so goes the rest.  Tajikistan, Kyrgyzstan, and Uzbekistan are mainly related to the global recession in indirect ways, but these still are creating quite the economic pain for their citizens.  These citizens greatly depend on remittances from family members working in Russia and Kazakhstan, and because of the construction slowdown, many of the jobs which supply remittances are drying up, leaving a slow trickle effect that is starting to drown the folks back home.

The Kazakh government has been proactive, first promising to flood the real estate and banking industries with $10, then $15, and now it is being reported $21 billion dollars drawn from their National Oil Fund.  However, economist Aitolkyn Kurmanova argues that the sum is not nearly enough to stop the bleeding, but that it is meant to bring calm to the population and markets and display government strength and stability.

The global crisis has found its way to Central Asia and its people are feeling its pain.