Improving Public Debt Management
In the OIC Member Countries
147
C) Policy RecommendationsAccording to the World Bank Debt Management Performance Assessment in 2011, Kazakhstan
appears to be very strong in some areas concerning debt management such as the legal
framework, governance, operational risk management, coordination with fiscal and monetary
policies as well as debt recording and reporting (World Bank 2011). Kazakhstan has
established an institutional and coordination system which is able to handle public debt well in
the shortterm. Fiscal policies are prudent, the monitoring of debt is well designed and the
existing debt management policies are rather transparent. However, mediumand longterm
debt strategies and risk management need to be further improved. Debt management is done
more or less on an annual basis. According to interview sources, “back office” work is still
rather deficient, but “front office” activities have been developed rather successful.
A longterm fiscal policy and strategy as well as related risk management has not been fully
developed. Therefore it is recommended to increase back office capacities (analytical and
conceptual tasks such as analysis, planning, forecasting and strategy development) especially
at the Debt Office to enable appropriate strategy development according to international
standards. To meet this requirement, increasing the personnel capacities of the back office
could be in particular a very rewarding investment. Furthermore, developing a mediumterm
fiscal policy strategy with defined target indicators going along with the development of an
appropriate mediumterm debt management strategy with the target to settle fiscal debt at
sustainable levels would deteriorate risks concerning public debt. For this task it is
recommended to parallel this approach by implementing a controlling strategy for the
mediumterm debt and risk management strategy.
The use of the National Oil Fund for debt management is somewhat erratic and not sustainable
at the beginning of 2017. The use of the United Pension Fund for large scale and forced public
debt financing is inhabits certain risks. The NBK’s intension to issue mediumterm billsofexchange could substitute debt financing by the pension fund at least to a certain extent.
Adjusting the National Oil Fund rules for strict application during “normal” times and some
defined flexibility in crisis times seems to be a good solution. The fund should be kept
sustainable in a mediumand longterm perspective. It should be avoided to deviate from the
agreed upon rules. The forced use for public debt financing of the Pension Fund should be
reduced step by step. Consider substitution for this financing resource by the issuing of
mediumterm bills of exchange (by the NBK).
Concerning the institutional setup and by looking at the distribution of responsibilities, the
coordination responsibility presently allocated to the Ministry of National Economy can be
reviewed. A separate “independent” Debt Management Agency might be created or the
coordination responsibility might be allocated to the Debt Office at the MoF. However, the
change of responsibility should not affect the close coordination of debt management with
development and investment planning.
Lastly, including measures to reduce the quasipublic debt development is recommended. This
means to review the need for SOEs as well as their privatization. Quasipublic debt might be
included in overall public debt management. Furthermore, Islamic finance sources (sukuk )
might be more systematically explored as potential additional public debt financing sources,
especially under the purpose to reduce certain debt related risks. However, efforts are needed
to reduce the cost for sukuk lending because Islamic finance instruments are considered to be
significantly more expensive than conventional lending tools in Kazakhstan at the moment.