Kazakhstani financiers explain spike in tax revenues

In 2022, Kazakhstan authorities reported a 59% growth in tax revenues ($46 billion in total). According to the Association of Financiers of Kazakhstan (AFK), this growth was driven by high oil prices, economic growth and the weakening of the national currency. The AFK said that thanks to additional tax revenues, the government cut the deficit of the country’s consolidated budget to $2.8 billion (by 2.7 times).

Allocations to the National Fund, which is responsible for the accumulation of taxes from oil companies and tax for public property controlled by private entities, accounted for the biggest growth (48%). Corporate income tax (CIT) accounted for $2.8 billion of that increase; tax on the extraction of commercial minerals accounted for $2.6 billion and Kazakhstan’s share under the production-sharing contract accounted for $1.5 billion.

Throughout 2022, oil prices rose by 39%, the national economy increased by 3.1% and the national currency weakened by 8%.

«Aside from the oil industry, the growth of tax revenues was driven by higher CIT and an increase in tax payments by big mining companies. The value-added tax also grew due to an increase in turnover of goods and services,» the AFK said.

Despite all this growth, the amount of money in the National Fund didn’t change in 2022 as the fund booked significant investment losses last year, the association added.

The consolidated budget’s costs rose by 14% to $49 billion. Debt servicing and repayment (due to growing interest rates and the debt itself), education and social services accounted for 80% of this increase in spending.

At the same time, healthcare spending dropped by 81% compared to 2021, thanks to the stabilization of the epidemiologic situation in the country, according to the AFK.

In 2022, Kazakhstan’s government planned to raise $9.7 billion to finance the budget deficit. In reality, it raised $9 billion last year.

The association forecasts that in 2023, allocations to the consolidated budget will reach $60 billion, a 32% increase over the same rate last year. On the other hand, public expenditures are expected to grow by 19% to $58.4 billion.

«Given that risks associated with geopolitical uncertainty, global recession and the tendency of public costs to grow are still there, the consolidated budget deficit may deteriorate,» the AFK said.

The association forecasts that the inflation rate will be double-digit and may reach 14.3% by the end of the year. According to AFK experts, the exchange rate between the tenge and USD will reach 497.1 tenge per dollar. As of January 27, the national currency of Kazakhstan got a bit stronger and traded at 460.44 per dollar.