Analytical commentary

What are the risks of Kazakhstan’s public debt growing?

How state budget parameters approved until 2025, including expenditures and reduced transfers from the NFRK, will affect the country’s public debt

The parameters of the republic’s budget have been determined until 2025, as well as guaranteed transfers from the National Fund of the Republic of Kazakhstan (NFRK) worth KZT 1.9–2.2 tln and targeted transfers for 2023 and 2024 in the amount of KZT 1.0 and KZT 0.4 tln, respectively. From 2023, the country will apply a fiscal rule, the countercyclical part of which assumes a cut-off price per barrel of oil at USD 48.9 in 2023 (USD 42.2 and USD 40.3 in 2024 and 2025, respectively).

Under the fiscal rule, the government of Kazakhstan determines the cut-off price — the price of oil, which limits the amount of revenues directed to the NFRK that can be used as guaranteed transfers to the budget (depends on the projected volume of oil production and the market price of oil); excess proceeds are accumulated in the NFRK.  

The transfer part of budget revenues will decline substantially after record indicators in 2020–2022 (KZT 4.5–4.8 tln), while budget expenditures in nominal terms will increase by 15% in 2023 and 4% in 2024. Budget expenditures will grow by another 5% in 2025 and amount to KZT 27.7 tln.

Does the growth of expenditures at the same time as declining transfers from the NFRK create risks for the budget balance and pave the way for a potential increase of public debt?

The answer to this question depends on the dynamics of income of the non-transfer part of the budget — tax and non-tax revenues. According to ACRA’s assessments, expected growth of non-transfer revenues in nominal terms should amount to around 33% by the end of 2022 — the highest figure in the past decade. This is largely due to higher inflation, and partly due to the implementation of the deferred effect of the dynamics of economic activity in 2020–2021.

The further trajectory of how non-transfer revenues will depend on economic growth rates, inflation waves, the deferred effect of taxation policy decisions (regarding tax breaks and the structure of the taxation regime), and the quality of the taxation process.

ACRA has considered three scenarios for the possible performance of non-transfer state budget revenues in 2023–2025:

  • Optimistic, which involves non-transfer revenues increasing by 20% annually in continuation of the current trend of heightened growth rates;

  • Base case, in which revenues increase by 13% annually on average, taking into account average growth rates over the past decade;

  • Conservative, in which growth amounts to 6% annually on average based on the lowest indicator recorded over the past ten years (excluding 2015, when revenues declined and the pandemic year of 2020, when growth amounted to 1%).

Depending on the scenario, the result of budget execution in 2023–2025 varies from a hefty default to a surplus. The base case scenario sees non-transfer revenues growing by 13% a year and results in an almost balanced budget in 2024–2025.

Table 1. Deficit of Kazakhstan’s state budget under the three scenarios for annual growth of non-transfer budget revenues, % of GDP
















Sources: Ministry of Finance of the Republic of Kazakhstan, ACRA

What might happen to Kazakhstan’s public debt?

Different trajectories of the formation of Kazakhstan’s need for budget financing and the potential growth of public debt in nominal terms can be traced under the three scenarios. As of the end of 2025, the gap in the size of the country’s public debt ranges from KZT 12 tln to a reduction even in nominal terms.

Under the first two scenarios, the ratio of public debt to GDP1 will remain moderate (20–25% of GDP) and close to the current 24%. The optimistic scenario involves public debt to GDP falling considerably by 2025.

It is worth noting that Kazakhstan’s fiscal policy will most likely not be focused on reducing nominal public debt because this is not an economic policy target when public debt is moderate. It is more likely that other parameters will be recalculated — expenditures, NFRK transfers or both indicators, taking into account the fiscal rule that will be activated in 2023.

Taking these factors into account, it is possible to conclude that until 2025, Kazakhstan’s public debt relative to GDP is not exposed to the risk of a substantial increase, even under the worst scenario. It will most likely be slightly higher or lower than the current indicator.

1 ACRA expects nominal GDP growth to be 17%, 12%, and 11% in 2023, 2024, and 2025, respectively.

Figure 1. Possible scenarios for growth of Kazakhstan’s public debt

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Zhannur Ashigali
Director, Project Manager for Central Asian Cooperation, Sovereign and Regional Ratings Group
+7 (495) 139 03 02
Svetlana Panicheva
Head of External Communications
+7 (495) 139 04 80, ext. 169
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