UPDATE 1-Kazakhstan frees up $3 bln for cash-strapped banks

(Adds details, context, background)

By Olzhas Auyezov

ALMATY, Nov 12 (Reuters) - Kazakhstan will free up about $3 billion for its cash-strapped banks by cutting minimum reserve requirements to combat the global credit crunch, central bank chairman Anvar Saidenov said on Wednesday.

He said the central bank saw the current account in surplus for 2008 and the first half of 2009, adding that pressure on the national tenge currency was manageable.

Banks face debt repayments of $12 billion next year amid tight refinancing conditions and rising levels of bad loans as the economy slows down and businesses and individuals find it hard to repay loans.

Saidenov said the reserve requirements would be cut from Nov. 18 to two percent from five percent on domestic liabilities and to three percent from seven percent on foreign debt.

"According to our calculations this should free up about 350 billion tenge ($2.9 billion) for the banks," he told reporters.

The measure is part of the state's broader economic rescue package that also includes capital injections of $3.5 billion for the four largest banks and $5 billion in loans for key industries and small businesses.

The government, which had originally earmarked $5 billion for capital injections, is considering offering the rest to smaller banks. "I do not rule out that this recapitalisation program will be extended to the top ten banks," he said.

Analysts say the stable exchange rate of the tenge is crucial for the banking sector in an economy that heavily relies on dollars for trade and loan contracts.

Booming investment transformed the ex-Soviet nation into the biggest regional economy but the credit crisis has ended Kazakhstan's double-digit growth.

A fall in global oil prices to less than half their July peak has raised concerns about Kazakhstan's highly leveraged economy. Oil accounts for 60 percent of Kazakh exports.

The falling prices for oil and metals, Kazakhstan's key exports, in turn have sparked fears of the tenge's potential depreciation. But Saidenov said the country's balance of payments remained strong in the first nine months of 2008.

Current account surplus was nearly $10 billion in January-September, according to preliminary data, compared to a $5.4 billion deficit in the same period of 2007.

The central bank has kept the tenge virtually pegged at around 120 tenge against the dollar throughout this year by intervening on the domestic market.

Despite lower commodity prices, Saidenov said he saw the current account surplus widening further in the fourth quarter.

"If prices remain at their current levels the situation will be the same in the first half of the next year," he said. "The pressure (on the tenge to devalue) has increased a bit, but it is generally manageable."