Republic of Kazakhstan: Selected Issues

IMF Staff Country Reports, May 9, 2017

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This Selected Issues Paper evaluates Kazakhstan’s oil rules, current fiscal stance, and long-term sustainability.
The sharp and sustained drop in oil prices since 2014 has reduced the value of Kazakhstan’s oil wealth.
Kazakhstan’s non-oil deficit path has been higher than suggested by long-term benchmarks, and adjustment is needed in the coming years to avoid fiscal sustainability risks and to promote intergenerational equity.
Price-based fiscal rules can help anchor short- and medium-term fiscal policy.
The non-oil deficit path introduced in the new National Fund of the Republic of Kazakhstan concept is broadly consistent with the proposed approach and should be followed by timely and decisive implementation of revenue and expenditure measures.

Oil price shock and wealth:
- Sharp and sustained drop in oil prices since 2014 reduced the value of Kazakhstan’s oil wealth.
Fiscal stance and sustainability:
- Kazakhstan’s non-oil deficit path has been higher than suggested by long-term benchmarks.
- Adjustment in the coming years is needed to avoid fiscal sustainability risks and to promote intergenerational equity.
Fiscal rules:
- Price-based fiscal rules can help anchor short- and medium-term fiscal policy.
- The non-oil deficit path in the new National Fund concept is broadly consistent with the proposed approach.

Implement timely and decisive revenue and expenditure measures to align the non-oil deficit path with long-term benchmarks.
Adopt and adhere to price-based fiscal rules to anchor fiscal policy in the short and medium term.
Follow the non-oil deficit path introduced in the new National Fund of the Republic of Kazakhstan concept.

Subject: Exchange rate pass-through, Exchange rates, Financial services, Fiscal policy, Fiscal stance, Foreign exchange, Oil prices, Prices, Real interest rates
Keywords: CR, D. production function, Eastern Europe, exchange rate, Exchange rate pass-through, Exchange rates, Fiscal stance, Global, import price shock, interest rate rule, ISCR, Kazakhstan, oil price, Oil prices, price, production function approach, Real interest rates, trend growth