Kazakhstan holds rates as squeeze hits local market

ALMATY, Sept 27 (Reuters) Kazakhstan's central bank kept interest rates unchanged on Thursday and delayed a rise in banks' reserve requirements to smooth the effects of the global liquidity squeeze on the local market.

The National Bank said in a statement it was keeping its key refinancing rate unchanged at 9.0 percent despite inflationary pressure.

It said it would also postpone raising its minimum reserve requirements on banks' foreign liabilities to Jan. 15 next year from the previously planned Oct. 9.

''Keeping the official refinancing rate unchanged, despite higher yearly inflation, is aimed at smoothing problems with banks' short-term liquidity, as well as easing inflationary expectations,'' the central bank said.

Kazakh banks rely heavily on foreign borrowing to fund their rapid growth and the global credit squeeze has had a knock-on effect in the oil-rich central Asian state.

The central bank has already postponed raising minimum reserve requirements due to the domestic liquidity squeeze at the end of last month.

Reserve requirements define what proportion of funds borrowed by banks must be held in special accounts and cannot be lent to customers.

Consumer prices rose 6.3 percent in the first eight months this year compared with 5.3 percent in the same period last year. Inflation accelerated to 8.6 percent in 2006 from 7.6 percent in 2005.

Kazakh banks nearly doubled their assets in the same period, having become heavy issuers on international bond markets.

But the global squeeze put an end to this stellar growth as lenders have much less funding available and are becoming pickier.

''We are switching from the strategy of active growth to that of stabilisation,'' Roman Solodchenko, chief executive of TuranAlem, Kazakhstan's number two bank, told reporters at a banking conference on Thursday.

REUTERS MP RN1649