Kazakhstan may find itself in a debt pit due to Finance Ministry’s policy, analysts warn

Kazakhstan may lose its status as a crediting country and become a borrowing country, according to analysts from BCC Invest, who broke down a draft law on adjusting budget parameters published recently by the Ministry of Finance.

The document says that the Ministry of Finance re-calculated its estimates and downgraded its forecast for tax revenue expected to be collected by the end of the year by $6.1 billion to $25.6 billion. To cover that gap the country’s government has already raised the bar for money transfers from the National Fund by $4 billion to $11.4 billion. As a result, the budget deficit was kept at the same level as planned as the rate has risen by just $125 million. However, the non-oil deficit, which excludes revenue from the oil industry, reported a significant growth of $3.4 billion to $21.4 billion.

According to analysts from BCC Invest, the budget revision and increase of National Fund transfers by $4 billion are very dangerous as they can undermine public finances.

«Record-high volume of transfers, increased non-oil deficit to 7.8% of the GDP and declining budget revenue indicate that the state budget is becoming more and more dependent on National Fund resources. In the long run, this can affect the financial stability of the country and limit room for fiscal maneuvers amidst possible unfavorable external conditions,» experts emphasized.

BCC Invest experts pointed out that utilizing the National Fund’s assets without a clear strategy for their replenishment can deplete the fund’s resources and diminish its ability to support the national economy in the future.

«Along with some other factors, the country can turn from a creditor to a borrower,» the analysts said.

In late October, while commenting on the issue of lower-than-expected tax revenue, Finance Minister Madi Takiyev told a Kursiv.media correspondent that last year’s overly optimistic projections were partly to blame for the shortfall. Kazakhstani economist Galymzhan Aitkazin has frequently warned about the problem, pointing out loopholes in the work of authorized agencies.