ASTANA – President Nursultan Nazarbayev ordered the government to make way for huge investments into Kazakhstan’s economy as it continues to deal with twin negative effects of low commodity prices and tit-for-tat sanctions between Russia and the West.
The President, chairing an enlarged session of the government on Feb. 10, instructed the ministers to both draw forth by one year $1 billion worth of expenditures to be made under the Nurly Zhol programme next year and use the pension funds as a source of around 4 billion dollars worth of additional capital. In addition to supporting new industrial enterprises and infrastructure development under the Nurly Zhol programme, money will primarily be used to support housing construction and job creation and to buy shares of foreign companies to ensure profitability of pension savings.
The session in Akorda discussed the results of social and economic development of 2015, monetary policy, diversification of the economy, an increase in the safety and profitability of the Single Accumulative Pension Fund, promotion of employment and strict control over spending are key stones of Anti-Crisis Action Plan discussed at the meeting.
“The National Bank should ensure an effective monetary policy while maintaining the level of free floating exchange rate, avoid sharp exchange rate fluctuations and continue with de-dollarisation. There are no restrictions on the receipt of liquidity by banks. I believe that the National Bank is pursuing a correct policy in the current circumstances. It is necessary to carry out daily monitoring of the financial situation and together with the government promptly take appropriate measures,” Nazarbayev said.
The President emphasised the importance of maintaining financial stability as part of the Anti-Crisis Action Plan for 2016-2018. He stressed the need for special attention to further diversification of the economy through the implementation of state programmes of industrialisation and the Nurly Zhol programme.
In particular, Nazarbayev instructed to allocate 360 billion tenge (US$1 billion) by transferring to the 2016 the funds planned for the realisation of the Nurly Zhol programme in 2017 to facilitate further development of the economy. It is planned to use 53 billion tenge (US$147 million) out of these funds for continuing the construction of rental housing through the Baiterek Holding, 149 billion tenge (US$414 million) for the construction of mortgage housing, including 22 billion tenge (US$61 million) for crediting the depositors through local executive bodies and the Housing Construction Bank of Kazakhstan. In addition, 97 billion tenge (US$270 million) will be allocated through the Samruk Kazyna Sovereign Wealth Fund on a returnable basis to support private developers. It was noted that the requirements for developers should also include co-financing, the availability of land and design and an estimate documentation and a fixed sale price.
The head of the state highlighted that akims (governors) are to be allocated 61 billion tenge (US$169 million) to construct supporting infrastructure for new areas of mass housing. He said, “The responsibility for this work is laid personally on each akim in whose region this activity will be carried out. I especially draw your attention to the fact that the cost of housing should be socially oriented.”
The Kazakh President noted that these actions will allow for the commissioning of an additional 1.5 million square metres of housing this year and will contribute to GDP growth.
The head of state also ordered the allocation of 194.5 billion tenge (US$540 million) that was formed due to exchange rate differences in relation to the funds of the National Fund, which had been planned for the implementation of the Nurly Zhol state programme in 2016. From the funds, 78 billion tenge (US$217 million) will be used for the acceleration of infrastructure projects provided for in Nurly Zhol for 2016, out of which 28 billion tenge (US$78 million) will be directed to the construction of 42 new schools.
The safety and profitability of depositors’ savings in Single Accumulative Pension Fund will be guaranteed by investments of free pension savings to the amount of 1.45 trillion tenge (US$4 billion) to a number of directions in 2016, Nazarbayev said. To be exact, 500 billion tenge (US$1.4 billion) will be converted into foreign currency and will be invested in external markets to diversify the fund’s portfolio and increase profitability of the pension savings.
Additionally, 600 billion tenge will be allocated to purchase conditional bonds from the second-tier banks and national holdings on a recoverable basis and under a market interest rate, which are meant to increase profitability and safety of the pension assets. The funds will be invested for stimulating the most important sectors of Kazakhstan’s economy, including small and medium business needs in working capital and the refinancing of loans. The financing of 700 business projects is expected to result in creating 14,000 new jobs and the sale of goods in the amount of 540 billion tenge (US$1.5 billion), providing tax revenues in the amount of nearly 60 billion tenge (US$167 million). Also, the implementation of the North-East-South project of the KEGOC national electric grid operator will decrease the power deficit in South Kazakhstan. Financing of major agricultural business projects and the creation of secure broadband access to the Internet for 3,456 rural settlements are included on the list of key projects.
President Nazarbayev emphasised that the priority of social policy is to maintain and create new jobs. He charged to allocate an additional 100 billion tenge (US$278 million) from the special reserve of the government in 2016 for these purposes.
From these funds, 63 billion tenge (US$175 million) will be used for the implementation of the Employment Road Map, which is aimed at repairing social infrastructure and housing facilities and the Roadmap 2009-2010, which operates to increase micro-credits, construction of hostels for young working people and subsidising the cost of employers for preserving jobs.
“It will provide coverage of measures to promote employment of about 60,000 people, including the creation of 18,000 jobs through the implementation of 1,000 infrastructure projects,” the President said.
Additionally, President Nazarbayev ordered to allocate 15 billion tenge (US$42 million) to complete the missing infrastructure facilities for small and medium businesses under the Business Road Map 2020 programme.
The President stressed that the allocation of significant funds for the maintenance of the national economy during the crisis is possible due to the timely creation of the National Fund, the reform of the pension system and the transition to a freely floating exchange rate of the national currency, which happened last year.
“Full and effective utilisation of funds allocated for the implementation of these measures will stimulate economic activity, support employment and add one percent into economic growth in 2016,” Nazarbayev stated.
The Kazakh government and the akims were instructed to ensure strict control over spending. The presidential administration was instructed to monitor the implementation of these instructions.
“Many countries have found themselves in a difficult situation and are forced to cut social spending, suspend projects, resulting in rising unemployment. Yet we continue building industrial facilities and open new markets. Our anti-crisis economic policy is directed not only at looking for and finding new sources of economic growth. At the centre of all my orders are the needs of the common man, his well-being and stability,” the President said.
During the session, Minister of National Economy Yerbolat Dossayev presented a report on the results of social and economic development for 2015 and plans for this year. Minister of Finance Bakhyt Sultanov reported on the execution of the state budget for 2015 and Chairman of the National Bank Daniyar Akishev reported on monetary policy.
The new announced investments come as Kazakhstan continues to face adverse effects of low prices for its main export staples such as oil and metals, continuing imposition of mutual sanctions by the West and Russia, which, along with Kazakhstan is a member of the Eurasian Economic Union since its launch in January 2015. Kazakhstan’s businesses have also been affected by the imposition of Russian sanctions on Turkey following its downing of a Russian military plane near the Syrian-Turkish border last November.
The announcement were also made as Kazakhstan is edging toward the early parliamentary election on March 20 in which six political parties are set to compete.