A man who founded the National Fund of Kazakhstan criticizes its work

Oraz Jandosov, director of the RAKURS Center for Economic Analysis and a former finance minister, who took part in the creation of the National Fund, has unleashed critiques on the organization’s work.

«The concept of the National Fund, which was founded in 2001, has been constantly destroyed since then by the government itself. I mean, unless we fix the entire structure of the National Fund, we won’t lower inflation,» he said during the CFO Summit.

Over the past two years, the government has changed the concept of regulating money withdrawal from the National Fund. Now, every time it wants to lend money to Samruk Kazyna, it can take money from the fund directly instead of through the budget. Later, the National Fund was allowed to acquire shares of KazMunayGas (KMG) whenever the cabinet wanted to support the country’s budget. Target transfers are only possible for strategically important infrastructural projects and after authorization by the president. Annual guaranteed transfers are also possible; they are up to the head of the state. Any other use of the fund’s money is prohibited.

Kazakhstani economists have been criticizing the mechanism of money withdrawal from the National Fund for years. According to analysts from Halyk Finance, every time the government uses money from the National Fund to buy KMG shares or bonds issued by Samruk Kazyna in order to finance the state budget or strategic projects, this disturbs the countercyclical nature of the budget policy. The analysts believe that the use of the National Fund outside of the budget process «contradicts with the idea of transparent and effective budget policy in the country.»

Last year, the National Fund transferred $9.1 billion to the state budget. This year the fund is going to transfer $7.9 billion. In 2023, the National Fund itself received $14.2 billion, including $10.2 billion from the oil sector and $3.9 billion in investment income. The fund’s assets have grown from $59.4 billion to $57.9 billion.

In November 2023, the Nationa Bank, which runs the National Fund of Kazakhstan, said that it would boost the fund’s profitability with the help of a new scheme of asset distribution. Instead of the conservative method (80% for developed countries’ bonds and 20% for shares), the regulator wants the fund to diversify its portfolio in terms of investments: 60% for bonds, 30% for shares, 5% for alternative instruments and 5% for gold.

In early January, when the government acquired shares of KMG for $2.8 billion and dealt with severe criticism, the Ministry of Finance said that the money «was invested, not spent,» insisting that the deal with KMG shares wasn’t a money withdrawal from the National Fund.

In mid-March, Chairman of the National Bank Timur Suleymenov reported that the National Fund’s assets have risen by 0.3% since January 1, 2024, reaching $60.2 billion as it received more than $2 billion over this period. At the same time, the National Fund transferred about $2.2 billion to the state budget. In February, the fund reported investment income of $870 million (1.44%).