This week, the media in the region covered several banking stories, such as Keremet Bank of Kyrgyzstan no longer issuing Visa cards following sanctions imposed by the U.S., and Kazakhstan’s Kaspi and Home Credit banks ceasing to provide debit cards to foreigners in Kazakhstan without a residence permit. They also covered several energy-related stories, including the government receiving five bids for the Kambar-Ata 1 HPP in Kyrgyzstan, and Uzbekistan reporting a steep rise in gas imports. Multiple outlets reported that Kazakhstan will choose a principal contractor for its NPP by June 2025. Other sources noted Russia’s and Uzbekistan’s concluding a strategic military partnership, and the EBRD publishing its record investments in Central Asia last year. The media also analyzed the World Bank’s latest growth forecasts for the region.

Banking & Finance

Keremet Bank, sanctioned by the U.S. Treasury last week, has ceased issuing Visa cards (Kursiv). However, the bank noted that previously issued cards can still be used at ATMs and branches. Customers can still transfer money through the bank’s mobile app and withdraw cash directly at one of the bank’s branches. Keremet plans to address the problem by offering new cards supported by the Elcard payment system. The U.S. Treasury accuses Keremet Bank of assisting entities with ties to Russia’s defense industry, specifically Promsvyazbank.

In Kazakhstan, Kaspi Bank and Home Credit Bank announced they will no longer issue debit cards to foreign citizens without a residence permit (Kursiv). Home Credit Bank revealed that the restrictions would remain until March 3 due to “internal procedures.” Meanwhile, Kaspi Bank indicated that the measures would be lifted on February 3 but that all cards issued after that date would be only valid for one year. Nevertheless, they also stated that all cards issued before January 19 would remain valid until their expiration date. According to a statement from CenterCredit Bank, new regulations on issuing debit cards to foreigners without a residence permit entered into force in Kazakhstan on January 20, limiting their validity to 12 months. The new measures do not apply to businessmen, investors, or diplomats. Kazakhstan’s Agency for Regulation and Development of the Financial Market reported that these regulations seek to prevent criminals from using the banking system for illicit activities, such as drug and human trafficking. They could also be related to efforts to minimize currency speculation by foreign citizens, as covered in last week’s report. 

On January 23, the Uzbekistani Central Bank opted to maintain its base policy rate at 13.5% (UZ Daily). Despite a slowdown in inflation in recent months, inflationary expectations remain high, necessitating a tight monetary policy. Overall, the bank aims to stabilize inflation and achieve its target of 5%. While inflation has been decreasing, it remains stubbornly high, reaching 9.8% year-on-year at the end of December. Core inflation also increased in December to 7.2% due to high growth in services and non-food goods prices. Consumer demand is persistently high due to wage growth and increased remittances. In 2024, remittances surged 30% to $14.8 billion (Gazeta.uz). While transfers from Russia increased by 29%, its share of total remittances continued to decline, as inflows from the U.S. rose by 35% and from the U.K. by 50%. According to recent forecasts, headline inflation is expected to fall to 7-8% by the end of 2025 as the effects of last year’s energy price liberalization fade and the economy and supply of goods continue to expand (UZ Daily). Nevertheless, rising global food prices could further increase inflationary pressures. Overall, the improvement in the government’s current account balance and the stabilization of the economic situation in neighboring countries will also reduce inflationary expectations.

The Expert Council of the Economy Ministry of Kazakhstan held its first meeting in Astana (Kursiv). Economy Minister Serik Zhumangarin, Finance Minister Madi Takiyev, and more than 20 economic experts attended the meeting. Most participants acknowledged that the government must conduct urgent and unpopular reform of the country's fiscal policy. They also supported the government’s proposed changes to the tax code. They advocated removing several tax benefits, increasing corporation tax, amending the taxation of the gambling industry, and taxing capital gains from 2026 instead of 2030. These measures would likely raise another $1.8 billion. However, these measures would not be enough to resolve the budget deficit. Rasul Rysmambetov, chair of NAC Analytica, noted that in order to reduce the budget deficit, the state would have to reduce its social obligations by liberalizing prices and aligning them with the market. He also underlined that only 10% of state expenditure is currently invested productively in the economy. Overall, the experts emphasized that these difficult decisions could no longer be postponed.  

Kazakhstan’s Ministry of Finance has announced plans to sell $13.2 billion worth of government stocks in 2025 (Kursiv). This marks a 23.2% increase compared to the $10.71 billion sold in 2024. The Ministry of Finance has planned 55 emissions, with an additional placement expected to raise $956 million. The volume of short-term notes in circulation declined 62% year-on-year to $871.6 million. The decline has been attributed to the bank switching to deposit auctions. Last year, the National Bank issued $1.5 billion worth of Eurobonds, the first dollar-denominated bonds since 2015.

Growth Forecasts

Last week, the World Bank published its “Global Economic Outlook” report for Central Asia and Europe (Kun). According to the report, Uzbekistan’s economy will expand by 5.8% in 2025 and 5.9% in 2026, a modest decrease compared to the 6.5% growth experienced in 2024. Meanwhile, Kazakhstan’s economy will grow 4.7% in 2025 and 3.5% in 2026. Kyrgyzstan’s economy will increase by 4.5% in both years, while Tajikistan is forecasted to grow by 6% in 2025 and 5% in 2026 compared to 8% in 2024. Overall, the forecast predicts a slight slowdown in economic growth across the region in the coming years.

Energy

According to the National Statistics Agency, Uzbekistan was a net gas importer for the second consecutive year (Kun). In 2024, natural gas imports from Russia and Turkmenistan increased 2.4 times to $1.67 billion. Meanwhile, gas exports to China fell between November and December from $53 million to $34.2 million. Nevertheless, total exports for the year surged to $627.6 million, an increase of 18.4%. Notably, Uzbekistan’s figures differ from China’s. China’s General Administration of Customs indicated that Uzbekistan exports $726.2 million of natural gas, a 25.3% rise. They also reveal that exports fell from $79.4 million in November to $58.8 million in December, although that figure is 8% higher in contrast to December 2023. Turkmenistan remains China’s largest gas supplier, delivering $9.57 billion last year. Russia also expanded its gas exports to China by 25% to $8.03 billion last year.  

Kazakhstan’s Energy Ministry has announced plans to dramatically increase oil production in the coming years to 28 million tons annually (Kazinform). The draft concept for developing Kazakhstan’s oil refining industry for 2024-2040 aims to increase production at several refineries. Production at the Shymkent refinery will grow from 6 million to 12 million tons. At the Pavlodar refinery, it will rise from 5.5 million tons to 8 million tons. Meanwhile, there will be a more modest increase from 5.5 million tons to 6.7 million tons at the Atyrau refinery. Lastly, production at the Aktau bitumen plant will increase from 1 million tons to 1.5 million tons, while bitumen output will rise from 500000 tons to 750000 tons annually. The Energy Ministry also underlined the importance of constructing a new refinery by 2030, with a capacity of 10 million tons annually (The Astana Times). The refinery should be completed by 2036 to forestall any shortage of fuel products.

Kyrgyzstan’s Committee on International Affairs, Defense, Security, and Migration ratified a finance agreement with the World Bank’s International Development Association for $13.6 million in additional funding to update the feasibility study for the Kambar-Ata 1 hydroelectric power plant (HPP) (AKIpress). The funding comprises a $11 million loan and $2.6 million in grants. Kyrgyzstan’s Minister of Energy, Talaiibek Ibraev, revealed the government had issued a tender for the project, and five international companies had submitted competing bids (AKIpress). Currently, preparatory construction work is underway, with completion expected in May 2025. The project is anticipated to cost between $4.5 and $5 billion. The first power unit will be commissioned in 2028. When finished, the HPP will have a capacity of 1860 MW.  

Meanwhile, Kyrgyzstan’s Minister of Energy, Talaiibek Ibraev, also discussed the ongoing construction of the second unit of the Kambar-Ata 2 HPP (Akchabar). He noted that the first unit with a capacity of 120 MW was completed a decade ago. The Minister announced that the tender for constructing the second and third units occurred recently and that seventeen companies participated, with seven finalists selected. The installation of the two units will cost $120 million. Firms from Kyrgyzstan, China, Russia, and Türkiye participated in the tender process.   

According to Kazakhstan’s Vice Minister of Energy, Sungat Yessimkhanov, Kazakhstan will choose a principal contractor for its planned nuclear power plant (NPP) by June 2025 (Kazinform). As reported earlier, four companies have been shortlisted: CNNC from China, ICHNP from South Korea, Rosatom, and EDF from France. Last year, Timur Zhantikin, the director general of JSC Nuclear Power Plants of Kazakhstan, indicated that the NPP would likely be constructed in Ulken or Kurchatov.

Hyundai Engineering and Sicim Kazakhstan are seeking to secure a contract to build a new gas processing plant in Kazakhstan's Karachaganak gas field (Kursiv). Recent reports indicate the Kazakhstani government has issued the operator of the field, Karachaganak Petroleum Operating B.V., an ultimatum to decide on the plant’s construction by June 2025. The government expects that the plant will be completed by 2029. However, they are increasingly concerned about the project’s timeline. Hyundai has proposed constructing the plant for $3.9 billion, although negotiations between Hyundai and the field's principal shareholders, Shell and Eni, are ongoing. As of January 2024, the field’s remaining reserves are estimated at 253.2 million tons. Energy Minister Almasadam Satkaliyev also noted that the government will implement several investment projects to sustain annual oil production at 11 million tons.  

Kazakhstan has adopted new rules for the auction of renewable energy projects (Kursiv). Investors must now provide proof of land ownership to participate in auctions. The current regulations do not specify that the construction land must be close to the planned site. As a result, many participants have submitted proposals for land far from the project site. Under the new rules, the auction organizers must respond to any shortcomings in a proposal within two days. The applicant will then have two more days to review their submission. They also plan on categorizing projects based on capacity (those above and below 499 MW) to clarify the technical specifications of future projects.

Transport

Sales of electric vehicles (EVs) surged by 60% in Kazakhstan last year (Kursiv). The number of registered electric vehicles stood at 12,587, compared to 7,680 at the end of 2023. Almaty and Astana lead EV registrations with 7,309 and 1,510 EVs, respectively. Overall, Kazakhstan registered 12,119 electric cars, 338 trucks, and 130 buses.

The European Bank for Reconstruction and Development (EBRD) invested $2.3 billion across Central Asia in 2024 (The Astana Times). The bank supported 121 new projects, with more than 58% of the funding allocated to sustainable infrastructure projects and 60% to green economy projects. Kazakhstan and Uzbekistan obtained the most funding, receiving $968.6 million and $942.8 million respectively. They also invested $90.9 million in Tajikistan and $53.7 million in Kyrgyzstan. The bank also made its first investment in critical minerals in the region, acquiring a 17.36% stake in Sarytogan Graphite Limited, the company exploring a graphite deposit in Karaganda.

Trade

Kazakhstan has banned all potato exports for six months because of rising domestic prices (Orda.kz). Potato exports rose 1.5 times in the past year due to growing regional demand. However, this increase in exports has resulted in a steep increase in prices on the domestic market. While these restrictions will not affect EAEU, the Kazakhstani government will monitor exports to EAEU countries. The government also stopped issuing phytosanitary certificates for exports as of January 16. Current reserves stand at 850000 tons, with expected consumption until April expected at 675000 tons. 

Security  

Russian Defense Minister Andrey Belousov visited Uzbekistan on January 22 (Gazeta.uz). Alongside his Uzbekistani counterpart, Shuhrat Kholmuhamedov, he signed a military cooperation plan for 2025 and a strategic military partnership for 2026-2030. The cooperation plan for 2025 includes over 50 joint activities. During talks at the Uzbekistani Defense Ministry, Belousov emphasized the high level of military collaboration between the two countries and elaborated on prospects for its development. They also discussed developing relations between their countries' respective security agencies in line with the agreement signed during Putin’s state visit to Uzbekistan in May 2024.