Kazakhstani authorities want the country’s National Fund to continue buying KMG shares

The Ministry of Finance has prepared a draft regulation that may legally pin a mechanism of purchasing KazMunayGas (KMG) shares by the National Fund as a regular practice. The document has been published on the www.legalacts.egov.kz website for public review.

The draft document suggests some adjustments to the agreement with the National Bank concerning trust management of the National Fund. The practice of buying KGM shares at the expense of the fund and with a discount to the market price is going to be a key novelty to the agreement. This scheme became possible last year when Kazakhstan adopted a new concept of public funds management. In the fourth quarter of 2023, this practice was implemented for the first time.

At the time, the National Fund bought KMG shares from the Samruk Kazyna National Wealth Fund for $2.8 billion. The deal was implemented in three stages. According to the National Bank, which represented the interests of the National Fund and the Ministry of Finance, these transactions were aimed at one goal: to bring money to the state budget, although Samruk Kazyna, a government-owned fund, was the direct seller of the stocks.

Later, the government explained that it had received the money through dividend payouts by Samruk Kazyna. In 2022, the government reported revenue of $529.9 million in dividends, a historical high for the fund.

The draft regulation says nothing about how long the government is going to exploit this scheme, although it suggests that shares acquired from Samruk Kazyna might be transferred back to the fund for trust management. The document also allows the National Bank to put some other assets of the National Fund under Samruk Kazyna’s management. An explanatory note to the draft regulation insists that the measure would allow the National Bank to use money from the National Fund for investments in foreign assets.

The document will be available for public review until February 6.