ASTANA – President Kassym-Jomart Tokayev delivered his annual state-of-the-nation address on Sept. 2, outlining priorities for Kazakhstan’s economic, political, and social future. The speech emphasized critical areas such as addressing budget deficit, strengthening governance, and improving living standards. Experts from various sectors shared their insights on key messages from the President’s address.
The address is an annual speech delivered to the people of Kazakhstan, typically outlining the government’s priorities, policies, and strategies for the coming year. It serves as a roadmap for the country’s development and provides guidance on key economic, social, and political issues. Photo credit: The Astana Times
Ensuring the stability of the financial and fiscal sectors was a cornerstone of President Tokayev’s address. President Tokayev’s remarks reflect a concern that Kazakhstan’s current fiscal and monetary policies are not well-aligned. He highlighted the importance of balancing monetary and fiscal policies to stimulate economic growth and ensure structural reforms, subtly referring to better coordination between the National Bank of Kazakhstan and the country’s government.
Long-standing problem
“More importantly, it is crucial to strike the right balance in monetary policy and develop fiscal policies and regulations that encourage the structural transformation of our economy,” said Assel Aben, chief expert of the Economic Policy Analysis Department at the Kazakhstan Institute for Strategic Studies.
Providing the context for why managing the balance between monetary easing and fiscal discipline is critical, she cited statistical data indicating that the banking sector’s assets reached 53.3 trillion tenge (US$110.5 billion) as of June 1, 2024, marking a 1.6% increase in May alone.
“In the first half of 2024, second-tier banks issued loans to economic entities totaling 16.4 trillion tenge (US$34 billion), which is 3.2 trillion tenge (US$6.6 billion), or 25% higher than the same period last year – 13.1 trillion tenge (US$27.2 billion). Both retail and corporate lending saw double-digit growth, with a 28.8% rise in consumer loans and a 19.8% increase in corporate loans. Loan disbursements were roughly split between businesses and individuals,” she said.
Aben further noted the critical need for a new banking law, as proposed by the President, to keep pace with the rapid developments in fintech and to foster economic activity through modern financial instruments.
“Regarding fiscal policy, the President instructed the government to implement effective measures for the efficient use of public funds, impose spending limits, and ensure strict expenditure control. He also emphasized the importance of streamlining intergovernmental fiscal relations and improving the management of the National Fund,” said Aben.
Financial analyst Andrei Chebotarev also pointed out the insufficient lending to the real economy, which Tokayev acknowledged in his address.
“What we have been discussing since the start of the war [in Ukraine] now resonates in the President’s words. The ongoing rift between the National Bank and the government, which has even spilled into the public domain, must end. When, instead of lowering the interest rate to stimulate lending, the government opts for handing out money through fiscal measures, it leads nowhere productive. It is high time to sit down at the negotiating table and address monetary policy and fiscal stimulus in a meaningful way,” wrote Chebotarev in his Telegram channel.
Living within means
Chebotarev highlighted Tokayev’s words about budget deficits and the necessity of living within means.
In his address, Tokayev stressed the failure to meet the revenue targets of the national budget, which was a “significant oversight of both the previous and current governments.” “It is unacceptable that this problem has become systemic and has hindered the country’s development,” said the President.
Kazakhstan’s budget deficit results from a combination of structural economic challenges, reliance on oil revenues, expansionary fiscal policies, and inefficiencies in revenue collection and spending.
Mazhilis, a lower house of the Kazakh Parliament, is currently reviewing two important draft laws—one about transfers from the National Fund, a sovereign wealth fund established in 2000 that accumulates the country’s windfall revenues from natural resources to the country’s budget for 2025-2027 and another about the overall national budget for the same period.
“Living within our means is the only recipe for stable public finances, as Tokayev stated, emphasizing the need to cut unnecessary spending on non-strategic tasks. He also drew attention to the failure to meet revenue targets,” said Chebotarev.
For 2025, the members of the Parliament expect the national budget to receive 21.7 trillion tenge (US$44.9 billion), including 15.6 trillion tenge (US$32.3billion) from regular income and 5.3 trillion tenge (US$10.9 billion) from transfers from the National Fund. At the same time, the government plans to spend 25.8 trillion tenge (US$53.5 billion), entailing a budget deficit of 4.1 trillion tenge (US$8.5 billion), or 2.2% of the country’s GDP.
Public-private partnership
Aliya Mussina, an expert from the Astana-based Economic Research Institute, said attracting private capital as part of the public-private mechanism (PPP) plays a key role in executing large-scale infrastructure projects in Kazakhstan.
Addressing the nation, President Tokayev underlined the need for “better preparing public-private partnership projects involving international financial institutions.” He instructed the government to identify a pool of large turnkey projects that international financial organizations could finance through the PPP mechanism.
Mussina said while Kazakhstan has made progress in developing its PPP framework since its launch in 2015, there is still significant room for improvement, especially when considering international best practices and the experiences of neighboring countries.
“In this context, it is essential for the country to consider the recommendations and standards of the Organization for Economic Co-operation and Development (OECD), with which Kazakhstan has been actively cooperating since 2008,” she said.
“Neighboring countries are also advancing their economies through PPP mechanisms, drawing on international experience, including OECD recommendations. For instance, Uzbekistan has been actively reforming its economic approaches. In 2019, the country passed a PPP law, laying the foundation for attracting private investments in infrastructure projects,” said Mussina.
She further highlighted several major PPP projects launched in Uzbekistan with the involvement of international financial institutions such as the Asian Development Bank (ADB) and the European Bank for Reconstruction and Development (EBRD). These projects include the construction of solar power plants, the modernization of hospitals, and the development of highways.
“Similarly, Kyrgyzstan established a PPP Center under its National Investment Agency in 2019, which coordinates efforts to attract private capital across various sectors. The center works closely with international organizations, including ADB and the UN, securing both technical and financial support for project implementation,” she said.
