## IMF Executive Board Concludes 2019 Article IV Consultation with the Republic of Kazakhstan

_IMF News, January 29, 2020_

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## Bibliographic details
- Published: January 29, 2020

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### Economic performance and outlook
- 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:
  - Growth expected to slow largely reflecting flat oil production.
  - Non-oil growth expected to remain robust.
- Risks are on the downside, reflecting trade tensions and commodity price volatility.

### Monetary and financial sector assessment
- Inflation targeting and tenge flexibility have helped absorb shocks.
- National Bank of Kazakhstan (NBK) actions:
  - Raised the policy rate by 25 basis points in September.
  - Kept the policy rate at 9.25 percent in December.
- Banking sector:
  - Liquidity remains ample.
  - Credit growth concentrated in the retail sector.
  - Continued cleanup through additional state financial support and a recently-concluded asset quality review.
- Executive Directors’ views and recommendations:
  - Monetary policy focus should remain on inflation.
  - Encourage NBK to strengthen monetary and exchange rate framework via greater independence, better coordination with the government, reducing dollarization, and improved monetary policy transmission.
  - Increase transparency of policy and operations and strengthen communications to boost credibility.
  - Support for the asset-quality review to better understand banks’ financial situations and identify corrective measures.
  - Any additional state support should go only to large and viable banks, subject to robust safeguards and in line with international best practices.
  - Banks need to adopt a new business model with less reliance on state programs and funding and improved risk management and lending practices.
  - Welcome formation of the new Agency for Regulation and Development of the Financial Market; manage transition risks carefully and ensure independence and adequate resourcing.
  - Encourage authorities to request an FSAP assessment.

### Fiscal policy and public finances
- 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:
  - Return to growth-friendly fiscal consolidation is necessary following the easing in 2019.
  - Improve spending and investment efficiency.
  - Increase revenue collections through tax and customs administration reforms; consider tax policy changes to broaden the tax base and enhance progressivity.
  - Upgrade Kazakhstan’s fiscal policy framework guided by principles of simplicity and clarity, broad coverage, flexibility, and enforceability.
  - Support public financial management (PFM) reforms and greater transparency.
  - A PFM assessment and a fiscal transparency evaluation would be useful.

### Structural reforms and governance
- Progress noted on the “100 Concrete Steps” with many flagship measures completed and remaining steps broadly on track.
- Market-opening actions:
  - First public offering of a blue-chip public company (KazAtomProm) took place in late 2018.
  - Preparations for privatization of other large state-owned enterprises are underway.
- Governance and corruption:
  - Steps taken to improve governance and address corruption vulnerabilities, but challenges remain.
  - 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.

### Executive Board assessment summary
- 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.

### Key statistics (selected indicators from Kazakhstan: Selected Economic Indicators, 2017-21)
- 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
  - Real GDP growth (%): 2017: 4.1, 2018: 3.6, 2019 (proj.): 3.8
  - Real oil: 2017: 8.7, 2018: 8.4, 2019: -0.3, 2020: 0.0, 2021: 1.4
  - Real non-oil: 2017: 2.7, 2018: 5.6, 2019: 4.8, 2020: 4.5
  - Crude oil and gas condensate production (million tons): 2017: 86, 2018: 90, 2019: 91
- Employment
  - Unemployment (%): 2017: 4.9
- Prices
  - Inflation (%): 2017: 7.3, 2018: 5.3, 2019: 5.5, 2020 (proj.): 5.0
- General government finances 1/
  - Revenue (% GDP): 2017: 19.8, 2018: 21.4, 2019: 19.9, 2020: 20.1, 2021: 20.4
  - Of which: oil revenue: 2017: 5.9, 2018: 7.4, 2019: 6.8, 2020: 6.4, 2021: 6.1
  - Expenditures (% GDP): 2017: 24.1, 2018: 18.9, 2019: 19.7
  - Fiscal balance (% GDP): 2017: -4.3, 2018: 2.5, 2019: -0.2, 2020: 0.1, 2021: 0.6
  - Non-oil fiscal balance (% GDP): 2017: -10.2, 2018: -4.9, 2019: -7.0, 2020: -6.4, 2021: -5.4
  - Gross public debt (% GDP): 2017: 20.3, 2018: 20.7, 2019: 21.0
- Money and credit
  - Broad money (% change): 2017: -1.7, 2018: 7.0, 2019: 0.8, 2020 (proj.): 5.8
  - Credit to the private sector (% GDP): 2017: 25.8, 2018: 22.7, 2019: 21.5, 2020: 21.8
  - NBK policy rate (%, eop): 2017: 10.3, 2018: 9.3
- Balance of payments
  - Current account (% GDP): 2017: -3.1, 2018: -2.8, 2019: -3.2
  - Net foreign direct investments (% GDP): 2017: -2.3, 2018: -2.7, 2019: -3.6
  - NBK reserves (in months of next year's imports of G&S): 2017: 8.0, 2018: 7.5, 2019: 7.2
  - 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
  - External debt (% GDP): 2017: 100.2, 2018: 88.5, 2019: 91.2, 2020: 87.0, 2021: 82.5
- Exchange rate
  - Exchange rate (y-o-y percent change; Tenge per U.S. dollar; eop): 2017: 15.6

1/ The fiscal accounts in 2017 include a state support to the banking sector of 4 percent of GDP.

*Source: IMF Executive Board Concludes 2019 Article IV Consultation with the Republic of Kazakhstan (Press Release No. 20/24), January 29, 2020.*

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## References

- [https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)
- [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)

_Source: https://www.imf.org/en/news/articles/2020/01/29/pr2024-kazakhstan-imf-executive-board-concludes-2019-article-iv-consultation_