Improving Public Debt Management

In the OIC Member Countries

141

4.1.11

Republic of Kazakhstan

A) Public Debt Dynamics

Compared to other OIC member countries, the Republic of Kazakhstan’s general government

debt levels are moderate. General government debt increased from 7% to 26% of GDP

between 2006 and 2016.

Additional liabilities not recorded in the budgetary system (“quasidebt”) amount to about 30% of GDP.

Before the recent oil price decline, the steady increase

in debt was accompanied by an even larger accumulation of financial assets because of high oil

revenues. Consequently, general government net debt decreased from around 11% in 2006 to

19% of GDP in 2014 (see Figure 430).

This situation has changed very significantly in 2014 because of the sustained low oil prices

and decreasing export revenues (especially from Russia and China). To finance increasing

budget deficits and to avoid a major recession, $16 billion were transferred from the National

Oil Fund (NFRK) to the budget in 2015, an amount being above the limit of $8 billion allowed

according to the rules. External monitors criticized the break of the transfer rules because this

may have negative effects regarding sustainable debt financing. The oil fund’s revenues are

estimated to be at around $5 billion on average per annum during “normal” times, but are

significantly lower at present. It is planned to reduce the transfers from the NFRK to the

budget to $5 billion in 2016. The NFRK's assets fell from $77.2 billion in August 2014 to $63.5

billion at the end of 2015 and have been estimated to equal about $60 billion by the end of

2016. According to interview sources in November 2016, it is intended to return to sustainable

oil fund reserves even at the cost of more severe budget cuts.

Net lending decreased from 7.7% of GDP in 2006 to 1.3% of GDP in 2009 because of declining

oil revenues during the global financial crisis. In 2015, net borrowing was 5.3% of GDP

following the decline in oil prices. The nonoil budget deficit in 2008 was 3.7% and steadily

rose to 13% in 2015. The government intends to reduce the nonoil deficit to 10% in 2016 and

to 7% in 2020. For 2025 a nonoil deficit of not more than 6% is intended, which would be

sustainable according to the MoF and the World Bank. At present, major budget cuts can be

observed.

Since mid2015, the value of the Tenge has devaluated towards the U.S. Dollar by about 50%.

To avoid a major recession, an infrastructure investment program for the period 20152017

has been launched to stimulate the economy, which is partly financed by the NFRK and by

some external financial institutions such as the World Bank, the Asian Development Bank and

the European Bank for Reconstruction under the Programme Framework Agreement (PFA). $9

billion will be contributed by Kazakhstan and another $9 billion by external sources. Fitch

Ratings has recently downgraded Kazakhstan to 'BBB' because it regarded the government’s

funding of infrastructure investment out of the NFRK and financing troubled stateowned

enterprises as nonsustainable.

Contingent liabilities impose a potential risk to public debt. The risk is mainly due to the large

quasifiscal sector. The national welfare fund (Samruk Kazyna), has estimated 50% of GDP in

assets and 30% of GDP in external debt. The highly pronounced banking sector with unstable

outlook may need further recapitalization in the future, imposing additional contingent

Estimates by the MoF in November 2016. These figures slightly deviate from the figures in the IMF WEO 2016.

Quasi debt relates mainly to liabilities of the three major public holdings: SamrukKazyna, Baitarek and Kazagro.