{
  "title": "IMF Executive Board Concludes 2019 Article IV Consultation with the Republic of Kazakhstan",
  "publication": "IMF News, January 29, 2020",
  "sourceUrl": "https://www.imf.org/en/news/articles/2020/01/29/pr2024-kazakhstan-imf-executive-board-concludes-2019-article-iv-consultation",
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  "summary": "1/ The fiscal accounts in 2017 include a state support to the banking sector of 4 percent of GDP.",
  "publishDate": "2020-01-29",
  "sections": [
    {
      "heading": "Economic performance and outlook",
      "content": "- Growth estimated at 4.5 percent in 2019 (preliminary).\n- Strong domestic demand driven by major oil and gas investments and government and household consumption supported by wage increases and consumer lending.\n- Headline inflation picked up but remained within the National Bank of Kazakhstan’s target band of 4–6 percent and stabilized in recent months.\n- Lower oil prices and higher imports weakened the external position; the current account balance deteriorated.\n- Exchange rate depreciated in the second half of 2018, but has been relatively stable thereafter in the absence of large shocks.\n- Over the next few years:\n  - Growth expected to slow largely reflecting flat oil production.\n  - Non-oil growth expected to remain robust.\n- Risks are on the downside, reflecting trade tensions and commodity price volatility."
    },
    {
      "heading": "Monetary and financial sector assessment",
      "content": "- Inflation targeting and tenge flexibility have helped absorb shocks.\n- National Bank of Kazakhstan (NBK) actions:\n  - Raised the policy rate by 25 basis points in September.\n  - Kept the policy rate at 9.25 percent in December.\n- Banking sector:\n  - Liquidity remains ample.\n  - Credit growth concentrated in the retail sector.\n  - Continued cleanup through additional state financial support and a recently-concluded asset quality review.\n- Executive Directors’ views and recommendations:\n  - Monetary policy focus should remain on inflation.\n  - Encourage NBK to strengthen monetary and exchange rate framework via greater independence, better coordination with the government, reducing dollarization, and improved monetary policy transmission.\n  - Increase transparency of policy and operations and strengthen communications to boost credibility.\n  - Support for the asset-quality review to better understand banks’ financial situations and identify corrective measures.\n  - Any additional state support should go only to large and viable banks, subject to robust safeguards and in line with international best practices.\n  - Banks need to adopt a new business model with less reliance on state programs and funding and improved risk management and lending practices.\n  - Welcome formation of the new Agency for Regulation and Development of the Financial Market; manage transition risks carefully and ensure independence and adequate resourcing.\n  - Encourage authorities to request an FSAP assessment."
    },
    {
      "heading": "Fiscal policy and public finances",
      "content": "- Despite strong non-oil revenue performance, a looser fiscal stance occurred in 2019 due to new spending initiatives: higher public sector wages, financial support to the vulnerable, and regional development initiatives.\n- Directors’ fiscal recommendations:\n  - Return to growth-friendly fiscal consolidation is necessary following the easing in 2019.\n  - Improve spending and investment efficiency.\n  - Increase revenue collections through tax and customs administration reforms; consider tax policy changes to broaden the tax base and enhance progressivity.\n  - Upgrade Kazakhstan’s fiscal policy framework guided by principles of simplicity and clarity, broad coverage, flexibility, and enforceability.\n  - Support public financial management (PFM) reforms and greater transparency.\n  - A PFM assessment and a fiscal transparency evaluation would be useful."
    },
    {
      "heading": "Structural reforms and governance",
      "content": "- Progress noted on the “100 Concrete Steps” with many flagship measures completed and remaining steps broadly on track.\n- Market-opening actions:\n  - First public offering of a blue-chip public company (KazAtomProm) took place in late 2018.\n  - Preparations for privatization of other large state-owned enterprises are underway.\n- Governance and corruption:\n  - Steps taken to improve governance and address corruption vulnerabilities, but challenges remain.\n  - Directors emphasized continuing improvements in the business climate, investing in infrastructure, strengthening property rights, enhancing competition, and streamlining state support to promote private-sector-led inclusive growth."
    },
    {
      "heading": "Executive Board assessment summary",
      "content": "- Directors agreed with the thrust of the staff appraisal.\n- Noted robust economic growth in 2019 supported by consumption and investment.\n- Welcomed progress on financial sector issues and structural reforms aimed at private sector development and inclusive growth.\n- Recognized challenges and risks, including commodity price volatility.\n- Recommended further actions across monetary, fiscal, financial, and structural policy domains as outlined above."
    },
    {
      "heading": "Key statistics (selected indicators from Kazakhstan: Selected Economic Indicators, 2017-21)",
      "content": "- Population (2018): 18.4 million\n- Per capita GDP (2018 - est., US$): 9,401\n- Quota: SDR 1,158.40 million\n- Literacy rate: 99.8% (2015)\n- Main export: crude oil, metals, minerals\n- Poverty rate: 2.5% (2017)\n- Key export markets: EU, China, Russia\n\n- Output\n  - Real GDP growth (%): 2017: 4.1, 2018: 3.6, 2019 (proj.): 3.8\n  - Real oil: 2017: 8.7, 2018: 8.4, 2019: -0.3, 2020: 0.0, 2021: 1.4\n  - Real non-oil: 2017: 2.7, 2018: 5.6, 2019: 4.8, 2020: 4.5\n  - Crude oil and gas condensate production (million tons): 2017: 86, 2018: 90, 2019: 91\n- Employment\n  - Unemployment (%): 2017: 4.9\n- Prices\n  - Inflation (%): 2017: 7.3, 2018: 5.3, 2019: 5.5, 2020 (proj.): 5.0\n- General government finances 1/\n  - Revenue (% GDP): 2017: 19.8, 2018: 21.4, 2019: 19.9, 2020: 20.1, 2021: 20.4\n  - Of which: oil revenue: 2017: 5.9, 2018: 7.4, 2019: 6.8, 2020: 6.4, 2021: 6.1\n  - Expenditures (% GDP): 2017: 24.1, 2018: 18.9, 2019: 19.7\n  - Fiscal balance (% GDP): 2017: -4.3, 2018: 2.5, 2019: -0.2, 2020: 0.1, 2021: 0.6\n  - Non-oil fiscal balance (% GDP): 2017: -10.2, 2018: -4.9, 2019: -7.0, 2020: -6.4, 2021: -5.4\n  - Gross public debt (% GDP): 2017: 20.3, 2018: 20.7, 2019: 21.0\n- Money and credit\n  - Broad money (% change): 2017: -1.7, 2018: 7.0, 2019: 0.8, 2020 (proj.): 5.8\n  - Credit to the private sector (% GDP): 2017: 25.8, 2018: 22.7, 2019: 21.5, 2020: 21.8\n  - NBK policy rate (%, eop): 2017: 10.3, 2018: 9.3\n- Balance of payments\n  - Current account (% GDP): 2017: -3.1, 2018: -2.8, 2019: -3.2\n  - Net foreign direct investments (% GDP): 2017: -2.3, 2018: -2.7, 2019: -3.6\n  - NBK reserves (in months of next year's imports of G&S): 2017: 8.0, 2018: 7.5, 2019: 7.2\n  - NFRK assets (in months of next year's imports of G&S): 2017: 15.1, 2018: 14.1, 2019: 14.7, 2020: 14.9, 2021: 15.2\n  - External debt (% GDP): 2017: 100.2, 2018: 88.5, 2019: 91.2, 2020: 87.0, 2021: 82.5\n- Exchange rate\n  - Exchange rate (y-o-y percent change; Tenge per U.S. dollar; eop): 2017: 15.6\n\n1/ The fiscal accounts in 2017 include a state support to the banking sector of 4 percent of GDP.\n\nSource: IMF Executive Board Concludes 2019 Article IV Consultation with the Republic of Kazakhstan (Press Release No. 20/24), January 29, 2020.\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- Republic of Kazakhstan and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.imf.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2020/01/29/pr2024-kazakhstan-imf-executive-board-concludes-2019-article-iv-consultation"
    }
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    "Published: January 29, 2020",
    "Growth estimated at 4.5 percent in 2019 (preliminary).",
    "Strong domestic demand driven by major oil and gas investments and government and household consumption supported by wage increases and consumer lending.",
    "Headline inflation picked up but remained within the National Bank of Kazakhstan’s target band of 4–6 percent and stabilized in recent months.",
    "Lower oil prices and higher imports weakened the external position; the current account balance deteriorated.",
    "Exchange rate depreciated in the second half of 2018, but has been relatively stable thereafter in the absence of large shocks.",
    "Over the next few years:",
    "Risks are on the downside, reflecting trade tensions and commodity price volatility.",
    "Inflation targeting and tenge flexibility have helped absorb shocks.",
    "National Bank of Kazakhstan (NBK) actions:",
    "Banking sector:",
    "Executive Directors’ views and recommendations:",
    "Despite strong non-oil revenue performance, a looser fiscal stance occurred in 2019 due to new spending initiatives: higher public sector wages, financial support to the vulnerable, and regional development initiatives.",
    "Directors’ fiscal recommendations:",
    "Progress noted on the “100 Concrete Steps” with many flagship measures completed and remaining steps broadly on track.",
    "Market-opening actions:",
    "Governance and corruption:",
    "Directors agreed with the thrust of the staff appraisal.",
    "Noted robust economic growth in 2019 supported by consumption and investment.",
    "Welcomed progress on financial sector issues and structural reforms aimed at private sector development and inclusive growth.",
    "Recognized challenges and risks, including commodity price volatility.",
    "Recommended further actions across monetary, fiscal, financial, and structural policy domains as outlined above.",
    "Population (2018): 18.4 million",
    "Per capita GDP (2018 - est., US$): 9,401",
    "Quota: SDR 1,158.40 million",
    "Literacy rate: 99.8% (2015)",
    "Main export: crude oil, metals, minerals",
    "Poverty rate: 2.5% (2017)",
    "Key export markets: EU, China, Russia",
    "Output",
    "Employment",
    "Prices",
    "General government finances 1/",
    "Money and credit",
    "Balance of payments",
    "Exchange rate",
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    "[The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)",
    "[Republic of Kazakhstan and the IMF](http://www.imf.org/external/country/KAZ/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[http://www.imf.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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