Kazakhstan battles crisis with bailout and reforms

By Maria Golovnina

ALMATY (Reuters) - Kazakhstan agreed an at least $3.47-billion (2.25 billion pound) bailout package Tuesday to help banks cope with a deepening economic crisis and ease public concern, and announced political reforms to head off opposition criticism.

Stung by credit ratings downgrades and falling oil prices, the oil-producing Central Asian state has been struggling to cope with the impact of the global financial crisis.

There have been no outward signs of protest or panic among the former Soviet republic's 16 million people but the government is worried that confidence in the system is eroding.

Under a partial nationalisation plan, the government will buy into the country's four biggest banks, giving the sector a much-needed breathing space.

Fitch Ratings agency said it was concerned "the domestic economy's growth prospects are impacted by a likely global recession, lower oil prices and a sustained near closure of capital markets which has led to a sharply lower credit growth."

The government also announced political reforms intended to counter opposition criticism before it takes over the one-year chairmanship of the Organisation for Security and Co-operation in Europe (OSCE), Europe's main human rights watchdog, in 2010.

The reforms require at least two political parties to be represented in parliament, where all 107 seats are held by the Nur Otan party of President Nursultan Nazarbayev, who has run the country since 1989.

Any party coming second in the polls would be guaranteed two seats in the assembly and the government said it had removed a number of bureaucratic hurdles to make it easier for political parties and media outlets to obtain official registration.