Kazakhstan’s sovereign wealth fund is spending more than it earns

In 2025, the Kazakh government complied with two key fiscal rules but withdrew more funds from the National Fund than it deposited. In other words, budget policy remains procyclical — despite entering the second year of the 2030 Public Finance Concept, which calls for a countercyclical approach.

Read also: The transfer trap: Why high oil prices aren’t saving Kazakhstan’s wealth fund.

The system of fiscal constraints, in effect since 2023, includes two primary rules and at least four auxiliary ones. The first, enshrined in the Budget Code, carries full legal force. The second, outlined in Kazakhstan’s concept of public finance management through 2030, is advisory in nature.

This distinction determines fiscal flexibility: Budget Code provisions are mandatory, while the concept’s targets, any of them, may go unmet in practice.

According to Kursiv Research, the government complied with both primary rules but violated one auxiliary rule in 2025.

Guaranteed transfer cap remains intact

The first rule limits the guaranteed transfer from the National Fund to the national budget. The cap is tied to projected oil-sector revenues and calculated using a «cutoff price,» defined as the lowest decile of quarterly oil prices over the past 15 years.

Despite its conservative design, the rule was tightened in 2024: the guaranteed transfer may not exceed 2 trillion tenge (approx. $4 billion), even if the cutoff price rises. The government complied with this rule in both 2024 and 2025.

Spending growth stays within limits

The second rule caps growth in national budget expenditures. Under the Budget Code, spending growth must not exceed the average GDP growth rate over the previous 10 years plus the inflation target.

In 2025, expenditure growth matched the calculated limit of 8.0%.

Auxiliary rules show mixed performance

Fiscal discipline under the auxiliary rules remains uneven. According to Kursiv Research, the government met three of four such benchmarks in 2025. However, one of the met indicators came close to breaching its upper limit during the year.

Deficit and debt metrics remain stable

Control over the state budget deficit and public debt continues to be a relative strength. In 2025, the deficit stood at 2.5% of GDP, below the 2.7% ceiling.

Debt indicators also remained within limits:

• Public debt reached 22.8% of GDP (below the 27.2% threshold).
• Government debt totaled 21.8% of GDP (below the 23.2% cap).

Non-oil deficit highlights structural imbalance

The non-oil deficit rule — designed to preserve National Fund assets — presents a growing challenge. The 2030 Public Finance Concept sets a declining trajectory, targeting 5.0% of GDP by 2030 with annual interim benchmarks.

However, the Budget Code establishes the non-oil deficit through the annual law on the national budget, creating a key inconsistency. For 2025, the concept caps the deficit at 6.0% of GDP, while the Law on the Republican Budget for 2025-2027 allows up to 7.3%.

See also: Kazakhstan’s external debt in 2025 and budget for 2026 visualized.

If measured against the law, the rule is satisfied. If measured against the concept, it is not.

The actual non-oil deficit reached 6.9% of GDP in 2025. Compared with strategic targets, this represents a gap of about 1.4 trillion tenge. The shortfall underscores a structural imbalance: non-oil revenues remain insufficient to cover a substantial share of expenditures.

Net asset rule weakens despite compliance

The state net asset rule, which limits external debt relative to the National Fund’s foreign-currency assets, is also under pressure.

Kursiv Research relied on data from the National Bank of Kazakhstan on external debt held by government entities and state-owned organizations — figures that closely approximate the indicators used to assess compliance.

While the rule was technically met in 2025, its metric deteriorated significantly, rising from 0.51 in 2024 to 0.65 in 2025.

Countercyclical policy goals remain unmet

The fiscal framework established under the 2030 Public Finance Concept was designed to support countercyclical policy. For an oil-exporting economy like Kazakhstan, that means restraining spending and building reserves during periods of high oil prices to cushion future shocks.

So far, that objective remains unmet.

Although the government met its planned spending growth target and stayed within the guaranteed transfer ceiling, fiscal policy remains procyclical — meaning the country is spending more than it earns.

Final figures underscore this imbalance. Total withdrawals from the National Fund, including targeted transfers, reached 5.25 trillion tenge (or 5.77 trillion tenge including operating expenses). By comparison, tax revenues from the oil sector totaled no more than 3.73 trillion tenge (3.77 trillion tenge overall).

In effect, withdrawals exceeded inflows by nearly 1.5 times — a pattern that has persisted since 2024.

Targeted transfers lack firm limits

This dynamic is made possible by the absence of quantitative limits on targeted transfers in budget legislation. The current Budget Code sets only qualitative criteria: such funds must be used to finance critical infrastructure and nationally significant projects.

However, excessive withdrawals directly contribute to breaching the auxiliary fiscal rule governing the non-oil deficit — at least when measured against the 2030 Public Finance Concept. This practice runs counter to the stated objective of preserving the National Fund’s assets.

Strong returns mask underlying risks

Rapid growth in National Fund assets over the past two years has helped obscure the risks associated with looser fiscal discipline.

In 2024, asset growth was driven largely by exchange rate gains. In 2025, it was fueled by record investment returns. As long as favorable market conditions persist for the fund’s foreign investments, procyclical fiscal policy may not immediately result in visible depletion of reserves.

That cushion, however, is highly contingent on external conditions. A deterioration in global markets could quickly expose the underlying fiscal vulnerabilities.