Kazakhstan reports high international reserves although they are lower than in neighboring states

The amount of international reserves in Kazakhstan has been gradually decreasing since 2020, reaching $35.6 billion as of December 2023. This is enough to cover a six-month import, which is twice as big as the standard but still lower than in many other developing countries, including neighboring ones, according to Halyk Finance.

According to the company’s analysts, Kazakhstan’s international reserves are gradually depleting due to various external shocks and ongoing problems with the state budget and payment balance.

«It definitely would be a good idea for the government to regularly assess their international reserves to cover all potential risks and threats. The ongoing strengthening of the tenge exchange rate driven by big transfers from the National Fund is causing the biggest concerns as external accounts are already in deep deficit,» the analysts said.

The international reserves of Kazakhstan include foreign exchange assets the National Bank purchases on the open market and gold along with other assets of the National Fund. As the National Bank reported on its website, since February 1, 2024, foreign exchange assets of the National Fund (assets in foreign currency and gold) have been reflected after the deduction of liabilities under the National Fund for Children program. The regulator hasn’t provided any other details.

In Q4 of 2023, around $2.8 billion from the National Fund was allocated for purchasing stocks of KazMunayGas and Samruk Kazyna apart from other guaranteed and target transfers from the fund that have been happening regularly.

At the same time, Kazakhstan is lagging behind many other developing nations, specifically neighboring countries in terms of this indicator. For example, the Russian reserves can cover imports for 16 months; the same rate for Uzbekistan is 11 months. The highest rate of the correlation between imports and reserves was at 9.8, Kazakhstan reported in 2016. Since then, the rate continued decreasing until 2020 when it increased for a short time due to the slowing of economic activities and more money allocated for reserves. Since then, it has been declining again and already reached values from ten years ago.

As of January 2024, Kazakhstan’s international reserves grew by 1.96% month-on-month to $36.7 billion. Net international reserves have also risen from $33.9 billion as of December 2023 to $34.7 billion (+2.3%). However, foreign exchange holdings of the National Fund dropped from $60 billion to $59.02 billion (-0.97%).