ALMATY - The Asian Development Bank approved on Friday a $1 billion loan for Kazakhstan to help stabilize its economy hit by low world oil prices.
The announcement comes a day after Kazakhstan, which had lost competitiveness to trading rivals during a wave of devaluations and depreciations in the region, abandoned a trading corridor for its tenge currency and introduced a freely floating rate that weakened the tenge by 26 percent against the dollar.
A Kazakhstan-based bank spokeswoman said the loan was already in the pipeline as part of its ongoing work with the country and not issued as an emergency measure.
The ADB loan will help the government modernize infrastructure and maintain spending programs for job creation, social services, support to low-income households, and private-sector development, particularly for small businesses, the Manila-based bank said in a statement.
The five-year loan will be released in two tranches of $500 million each and will bear the interest rate of LIBOR plus 200 basis points.
"This ADB loan will support efforts to stabilize the economy following the recent move by the government and the National Bank to adopt a free-floating exchange rate together with inflation targeting," the bank said.
Kazakh President Nursultan Nazarbayev said on Thursday that by introducing a free foat for the tenge, the central bank and government had acted in the interests of local exporters. He said prices for oil and metals - key Kazakh exports - could stay low for another five years.
The Central Asian nation's government expects growth in gross domestic product to slow to 1.5 percent this year from 4.3 percent in 2014.