Improving Public Debt Management

In the OIC Member Countries

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B) Public Debt Management

Governance and Strategy Development

Legal framework

An important legal document regarding debt management in Kazakhstan is the budget code (in

particular Section 12).

State borrowing in Kazakhstan is defined as borrowing by the

government Kazakhstan, local executive bodies and the National Bank of Kazakhstan (NBK)

(Republic of Kazakhstan 2008, Article 199). Resolution No. 906 (2009) defines the limits on

state borrowing (World Bank 2011).

Managerial structure (incl. coordination with other policies)

Several institutions are responsible for public debt management in Kazakhstan. The Ministry

of National Economy

is formally responsible for overall coordination and strategic planning of

public debt management. This unique concept is based on the view that Kazakhstan is a

developing country and therefore debt management strategies have to be in line with

development planning which is the core competence of this Ministry.

The MoF is responsible for budget financing (incl. issuing of government bonds), debt

monitoring and debt statistics. The Department for the Administration of Government

Obligations (Debt Office) at the MoF is the

de facto

coordination and planning office according

to interview sources, the reason being that the Debt Office has the best information and is

involved strongly in coordination issues. The Treasury is responsible only for operational

activities such as payment transactions.

The NBK takes part in the debt management coordination by monetary policy operations

(issuing short term bills of exchange to reduce liquidity of the commercial banking sector to

reduce inflation) and currency policy (free floating exchange rate for the past one and a half

years with severe devaluation effects). The NBK acts independently according to the law, but

the Minister of Finance is a full member of the NBK Council of Directors.

The NBK administers the NFRK, which financially supports the government budget. The NBK

also administers the Unified Pension Fund which is owned by the contributors. When the many

privately run pension funds were unified and taken over (in administrative terms) by the NBK

in 2013, the MoF used it as an important source of debt financing. The fund was used up to

47% to buy inflationadjusted government bonds (dividends are inflationbonded plus 0.01%

to 0.1%). This financing tool is discussed controversially. The use of the fund should rather be

at its own decision and not forced by government to invest in low yielding government bonds.

The NBK intends to issue mediumterm billsofexchange in the future partly to substitute for

the issuing of the controversial pension fund bonds. Overall coordination, especially decisions

regarding the use of the NBK administered funds is done by the Coordination Council chaired

by the President of the Republic. Members are the Prime Minister, the Ministers and to a

certain extent representatives of international financial institutions, who have an observation

status. At a lower level, the Coordination Council chaired by the Minster of National Economy,

attended by relevant Ministries and representatives of the Budget Committee, prepares and

recommends decisions for the Presidential Coordination Council.