Kazakhstan’s public finances improved markedly in the first three months of 2026, with treasury revenues and expenditures executed almost in full. Notably, value-added tax (VAT) receipts surged 48.6% year over year, even though some payments were still taxed at the previous 12% rate (for fourth-quarter 2025 liabilities). In addition, authorities appear to have resolved a two-year problem of underfunding in the health care system.
Revenue performance beats expectations
Public finance data for the first quarter point to cautious optimism. According to the Ministry of Finance, total state budget revenues for January-March 2026 reached 7.2 trillion tenge (approximately $15.5 billion), with the plan fulfilled at 99.9%. The shortfall was minimal — about 8 billion tenge.
This performance marks a clear improvement from the same period in 2024, when overly optimistic tax revenue projections created a cash gap that the government covered through excess withdrawals from the National Fund of the Republic of Kazakhstan.
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Taxes account for the bulk of budget revenues. In the reporting period, tax authorities collected 6.2 trillion tenge, exceeding the plan by 3.3% (about 200 billion tenge). Tax revenues were nearly 1 trillion tenge higher than in the first quarter of 2025.
Still, two key taxes — corporate income tax and VAT — fell slightly short of targets. Corporate income tax receipts rose to nearly 1.5 trillion tenge, up 7.6% (103 billion tenge), but reached only 95.6% of the plan, leaving a 69 billion tenge gap.
VAT revenues approached 2 trillion tenge, posting strong year-over-year growth of 48.6% (642 billion tenge). However, collections reached 97.7% of the plan, with a shortfall of 45 billion tenge. Some VAT payments were still calculated at the previous 12% rate because they relate to fourth-quarter 2025 transactions.
Spending priorities remain concentrated
The three largest expenditure categories — social assistance and social security, education, and debt service — accounted for about 60% of total spending and roughly half of the overall increase in expenditures.
The largest share went to the nonsequesterable category of social assistance and social security, which totaled 1.8 trillion tenge in the first quarter. Education ranked second at 1.5 trillion tenge. Spending plans for both categories were nearly fully executed. Given regular indexation of benefits and ongoing population growth, spending cuts in these areas appear unlikely in the near term.
Debt service pressures grow
Debt service was the fastest-growing expenditure category during the period. Year over year, spending in this area rose 21.7%, compared with a 13.3% increase in total expenditures. Nearly 1.2 trillion tenge was allocated to debt-related payments.
Debt service continues to claim a growing share of the budget, reaching 15.7% by the end of the first quarter. That means roughly one in every six tenge is spent on servicing obligations rather than on economic development or infrastructure. While comparable to the first quarter of 2025 (14.6%), this level is significantly higher than in 2024 (11.8%).
Health care funding gap addressed
A two-year shortfall in health care funding appears to have been resolved. In 2024-2025, government cash expenditures on health care fell short of planned levels by a combined 336 billion tenge (about $748 million).
Kazakhstan’s public health spending is divided into two main components. The first covers the guaranteed volume of free medical care, including primary care, ambulance services, and subsidized medications. This portion is funded directly from the state budget and has been fully financed in recent years.
The second component covers the mandatory social health insurance system, which provides access to specialized care and more expensive diagnostics. This system is funded through contributions from employers and employees to the Social Health Insurance Fund (SHIF), along with government contributions for individuals outside the labor force, including children, students, new mothers, and retirees.
The funding gap primarily stemmed from insufficient state contributions for these groups.
Government steps in after SHIF criticism
Against this backdrop, the government in January 2026 sharply criticized the fund and reassigned oversight to the Ministry of Finance. The fund faced allegations of widespread irregularities, including fictitious patients and improper billing practices — such as gynecological procedures reportedly recorded for male patients.
Authorities also raised concerns about 588 billion tenge in investment income accumulated by SHIF since 2020, further intensifying scrutiny of its operations.
The denouement came in March, when Prime Minister Olzhas Bektenov instructed cabinet members to submit proposals to cap annual state contributions from the budget at a level no higher than the fund’s investment income. He also directed the government to use the fund’s accumulated assets to finance both the guaranteed volume of free medical care and the mandatory social health insurance system.
Health care still lags in funding
Despite these measures, health care remains the most underfunded sector. In the first quarter of 2026, allocations totaled 439 billion tenge — just 88.5% of the planned amount.
That said, budget discipline had already begun to improve before the new amendments took effect, suggesting the recent policy changes may reinforce an existing trend toward tighter fiscal execution.
