ASTANA – Kazakhstan’s National Fund, long viewed as a financial lifeline for the country’s future, is now under increasing scrutiny from experts due to the heavy reliance of the country’s budget on the fund transfers.
5000 tenge. Cash money of the Republic of Kazakhstan. Photo credit: Shutterstock.
The need to put stricter rules that govern the transfers was repeatedly raised by President Kassym-Jomart Tokayev, including in his September state-of-the-nation address.
What is the National Fund?
The National Fund was established in 2000 with the goal to stabilize the economy and safeguard massive hydrocarbons revenues. The fund is managed by the National Bank of Kazakhstan (NBK).
The fund performs two key functions: saving and stabilizing.
The saving function ensures the accumulation of financial assets with long-term returns at moderate risk. The stabilizing function mitigates economic overheating and inflation during periods of high commodity prices by channeling excess revenues from oil and gas taxes into foreign assets. When commodity prices fall, these assets are converted back into transfers to the budget to support spending and economic growth.
The National Fund disburses funds through guaranteed transfers to the national budget and targeted transfers for socially significant projects.
The assets are held in a government account at the NBK. According to the data from NBK, in 2014, the fund assets peaked at $77.2 billion, but have been slowly declining since then. By December 2022, the figure plunged to $55.7 billion. As of September, the assets of the fund reached $62.7 billion.
Transfers from the National Fund
The National Fund disburses funds through guaranteed transfers to the national budget and targeted transfers for socially significant projects. According to the data from the NBK, between 2020 and 2022, transfers from the National Fund ranged between 575 billion tenge (US$1.2 billion) in January 2020 to 455 billion tenge (US$937.5 million) in December 2022.
The data from the Finance Ministry indicates that in 2023, 4.1 trillion tenge (US$8.4 billion) was directed from the National Fund to the national budget in the form of transfers.
According to Kazakhstan’s draft budget for 2025-2027, withdrawals from the National Fund are projected to reach 5.4 trillion tenge (US$11.1 billion) in 2025.
Timur Suleimenov, chairman of the National Bank of Kazakhstan, which manages the fund, assured the transfer volumes in the following years are set significantly lower. In 2026-2027, transfers are expected to total two trillion tenge (US$4.1 billion), with no targeted transfers planned, said Suleimenov at an Aug. 27 government meeting.
Suleimenov noted that if significant tax reforms do not result in substantial and systemic measures to raise the national budget’s revenue, additional withdrawals from the National Fund may be necessary in 2026-2027.
Analysts project that if there had been no withdrawals or bond investments, the fund’s assets could have soared to $262.4 billion, representing 100.4% of GDP.
Data from the analytical materials prepared by the School of Analytics, an initiative launched by the Senate, the upper chamber of the Kazakh Parliament, revealed that the first major withdrawal from the fund occurred in 2009 to mitigate the impact of the 2007-2008 global financial crisis. A total of 1.2 trillion tenge (US$2.4 billion) was allocated to the Development Bank of Kazakhstan, Samruk Kazyna Sovereign Wealth Fund, and KazAgro holdings, aimed at recapitalizing banks, stabilizing the real estate market, and financing real sector projects.
In 2014, one trillion tenge (US$2 billion) was distributed in two tranches to support small and medium-sized businesses (SMEs). Of this, 500 billion tenge (US$1 billion) was used to address problematic loans, fund industrialization projects, and aid SME development. The remaining 500 billion tenge (US$1 billion) recapitalized the Problem Loan Fund to stabilize the banking sector, acquire toxic loans, provide preferential loans to SMEs, and finance the construction of the EXPO 2017 complex.
From 2015 to 2017, $9 billion was withdrawn at a rate of $3 billion annually. In 2021, the fund allocated 1.8 trillion tenge (US$3.6 billion) in targeted transfers to support healthcare, the Nurly Zher state housing program, and the Employment Roadmap.
Between 2009 and 2023, an additional 3.5 trillion tenge (US$7 billion) in bond loans was issued from the fund. The largest withdrawal, 8.1 trillion tenge (US$16.3 billion), took place between 2020 and 2023 to combat the Covid-19 pandemic and meet other social obligations.
In 2024, the fund began supporting the new National Fund for Children program, which provides annual funds to citizens under 18. The program is funded by 50% of the fund’s average investment income over 18 years. In 2023 and 2024, targeted transfers accounted for 45% of total transfers, reflecting the increasing role of oil revenues in meeting social commitments.
In the first seven months of 2024, three trillion tenge (US$ 6.2 billion) had already been spent—83% of the 3.6 trillion tenge (US$7.2 billion) transfer budgeted for the year.
In 2023, the fund acquired shares of KazMunayGas, the national oil and gas company, valued at 1.3 trillion tenge (US$2.6 billion). In 2024, the government opted to purchase shares of Kazatomprom for the fund to support the national budget.
The NBK also plans to sell between $1.3 to $1.4 billion in currency from the National Fund this October, based on preliminary government requests for national budget transfers.
Government strategies to limit fund withdrawals
To reduce fund withdrawals, the government introduced measures in the mid-2010s to consolidate budget spending. In September 2022, the Public Finance Management Concept until 2030 was approved, establishing countercyclical fiscal rules to limit fund transfers.
The government is also working on a new Budget Code and Tax Code aimed at simplifying the budget process, improving tax administration, and incorporating digital solutions.
Efforts to combat the shadow economy include updating legislation, further digitizing customs administration, creating a national goods traceability system, promoting cashless payments, and enhancing currency control.
Factors behind the fund’s decline
Kairbek Arystanbekov, the director of the Institute for Economic Policy, discussed the factors that influenced the fund’s reduction during the profitable years of 2014-2016.
“In 2014, the National Fund’s assets surpassed $77 billion. Since then, they have decreased due to various internal and external factors,” he told Kazinform news agency. “One significant external factor was Kazakhstan’s accession to the Eurasian Economic Union in 2015. Before joining, prices in Kazakhstan were 30-50% lower than in Russia. After entering the union, Russian goods flooded the Kazakh market, driving up the cost of living here while prices remained stable in Russia. This affected our social sector, ultimately leading to increased government spending.”
The expansion of the social sector coincided with a slowdown in economic growth. From 2015 to 2021, economic indicators worsened, and increased social spending in response to the Covid-19 pandemic added further pressure. As a result, the fund did not grow, while government expenditures continued to rise, requiring further withdrawals from the fund.
Currently, 40% of Kazakhstan’s state budget is allocated to social sectors, with salaries for teachers, healthcare workers, military personnel, and firefighters seeing significant increases. This has placed added strain on the budget.
Oil prices have also played a major role in the government’s reliance on the National Fund. In 2014, oil prices were high, with Brent crude reaching $100 per barrel, but they dropped as low as $30 per barrel in 2016. Today, oil is priced at around $70 per barrel. If prices had remained at $100 per barrel, withdrawals from the fund might have ceased entirely.
Reliance on the National Fund
Rasul Rysmambetov, a Kazakh economic and financial expert, assessed the current state of the fund, emphasizing that global turbulence poses risks.
“Over the past ten years, the fund has fluctuated, and we have essentially dipped into it with both hands,” he told The Astana Times.
“There are guaranteed and targeted transfers, and now the National Fund is also being used to purchase national companies. This practice needs to be reduced. However, we find ourselves in a difficult situation because a large portion of state expenditures, especially social spending, is growing while development budgets are shrinking,” he said.
In his opinion, preventing the fund from depletion will require serious and possibly unpopular measures to be taken swiftly. He estimated that approximately 5.4 trillion tenge (US$11.1 billion) would be withdrawn from the fund, while transfers might total seven to eight trillion tenge (US$14-16 billion).
Rysmambetov highlighted that it is unsustainable to depend solely on the National Fund for long-term economic development, as the country is withdrawing more than it is depositing, leading to eventual depletion.
He emphasized the need for a comprehensive audit of social spending to identify inefficiencies and misuse of funds.
“The government is working on digital tools like the electronic family map, business map, and the digital tenge to better monitor who is receiving financial aid and ensure they are eligible. By increasing transparency and accountability in social spending, we could potentially cut expenditures by 20-30%,” he said.
To reduce reliance on the fund, Rysmambetov called for long-overdue economic reforms. He warned that political leadership often prioritizes social support at the fund’s expense, which is unsustainable.
“Bold action and unpopular reforms are necessary. By 2025, we should see significant progress, and by the end of the year, these initiatives should be fully operational. Monitoring state expenditures and improving budget discipline will be key steps forward,” he said.
According to him, another way to reduce dependency on the fund is to diversify the economy. While there are ongoing efforts to invest in infrastructure and build new factories, the country must also reduce its reliance on oil.
“Oil has been our lifeline, and the National Fund is built on oil revenues. However, we must explore other sectors, such as agriculture, machinery, and IT. Diversification is crucial, and oil revenues should account for no more than 20-25% of our budget,” said Rysmambetov.
President Kassym-Jomart Tokayev recently called for improvements to the Tax Code during his state-of-the-nation address, a move Rysmambetov considers necessary. He noted that few people in Kazakhstan pay taxes and numerous special tax regimes exist. A new Tax Code is expected to be discussed in early 2025.
“If we manage to collect more taxes, we may not need to rely as heavily on the National Fund,” said Rysmambetov.
