A campaign slogan – “Mortgages at 10 Percent Interest!” – is featured on a billboard touting a leading contender in Kyrgyzstan’s October 4 parliamentary elections. For many in this Central Asian nation, which is grappling with high inflation and currency depreciation, the cheap-credit pledge seems too good to be true.
And yet the campaign promise made by Respublika-Ata Jurt, a hybrid business-nationalist party that has campaigned in bold and populist fashion, has traction. It seems to be tapping into deep popular insecurities about a housing market undermined by flagging remittances.
Securing housing and mortgages has long been a problem for new arrivals to Kyrgyzstan’s main urban centers – the capital Bishkek and the southern city of Osh. Both cities are fringed with grim and often illegally constructed settlements of ramshackle, self-built housing that serve as testimony to the hunger for cheap, permanent accommodation.
The market for legal housing, which tends to be priced in US dollars, has for many years been fuelled by the cash earned by a million or so Kyrgyz men and women working abroad, mainly in Russia.
With the collapse of the Russian ruble to almost half its value against the dollar since the start of 2014, remittance money has been able to buy far less. Kyrgyzstan’s own currency, the som, has taken a 30-percent hit in the space of a year, compounding a growing domestic liquidity problem.
And still, house prices have remained stubbornly high, falling by 10 percent at most.
“If migrants used to send home nearly $2 billion and half of that went onto the property market, now they are sending closer to $1 billion and people are struggling to service the debt on their mortgages,” said Temirbek Azhykulov, head of the International Business Council in Bishkek.
Politicians in campaign mode are gleefully ignoring the ominous signs.
During a televised debate on September 27, Respublika-Ata Jurt co-leader Omurbek Babanov, a business tycoon and former prime minister, doubled down on his promise of cheap credit for the masses.
“Market mortgage rates are at 25 percent. The other 15 percent should be subsidized by the state. The people will then get mortgages at 10 percent interest. If the people support us and give us 65 seats [a majority in a parliament of 120], then we will provide 7,500 flats at this social rate annually,” he said. “Nothing like this has ever happened in the history of Kyrgyzstan.”
Many have dismissed Babanov’s promises of lavishly subsidized credit as fantasy.
“And by what means does a Babanov government intend to provide 7,500 families with subsidized mortgages every year?” economist Azamat Sharshekeyev asked Focus.kg.
That has not stopped rival parties from campaigning along similar lines.
One party, Onuguu-Progress, has made a vaguely outlined, Robin Hood-style pledge to make “elite housing” pay for new, affordable homes.
Meanwhile, the Social Democratic Party (SDPK), effectively controlled by President Almazbek Atambayev, says it will set up a subsidized mortgage fund for teachers and doctors. Subsidized housing for key state employees has been a core message in recent speeches by Atambayev.
“I know all too well what it is like to move around from one [temporary] flat to another,” he told border service workers at a ceremony on August 29, one week before the election campaign officially got underway. “[Employees of the armed forces] need help during this difficult time.”
The remarks were a re-tread of sentiments expressed in 2014 at a similar ceremony for newly housed employees from the Emergency Situations Ministry.
During that earlier speech, he alluded to a $100-million pot for cheap mortgages that would form part of a $1-billion-plus Kyrgyz-Russian Development Fund designed to aid Kyrgyzstan’s accession to the Eurasian Economic Union.
Financing has been distributed to businesses, but nothing has been put aside for housing, fund officials have said.
As part of its affordable housing plans, the SDPK-dominated government in September laid out its blueprint for the creation of a state mortgage company. But with only $150,000 to its name, that fund will need serious help to become a viable player in the mortgage market.
With the economic situation so uncertain, commercial lenders are increasingly risk-averse, while at the same time eager to avoid incurring the wrath of a discontented populace.
In the years following the 2010 revolution, the sight of angry mobs assembling around banks and other institutions became commonplace. Some petitioners were debtors that had lost property and other assets in defaults. In other cases, often-fiery rallies were whipped up by populist groups.
“This anti-bank mood exists not just in Kyrgyzstan, but on Wall Street too,” said Anvar Abdraev, president of the Union of Banks of Kyrgyzstan. “In difficult times people direct their anger towards financial institutions. Given the macroeconomic picture and the currency instability, banks have to be cautious.”
Voters like Aijana Abdyrasulova, a 48-year-old woman working out of a kiosk near a billboard advertising Respublika-Ata Jurt’s mortgage pledge, are skeptical of politicians’ promises.
“As far as I am aware, this Babanov has his own commercial bank. He could provide at least ten of these social mortgages from his bank. Then we might believe his party will do the same,” said Abdydrasulova, who shares a rented apartment with her sister and two daughters.
“Until then I trust no-one,” she told Eurasianet.org. “And I will vote ‘against all.’”
"Originally published by EurasiaNet.org"