IMF Executive Board Concludes the 2023 Article IV Consultation with the Republic of Kazakhstan

February 7, 2024

Washington, DC: The Executive Board of the International Monetary Fund (IMF) concluded the 2023 Article IV consultation [1] with the Republic of Kazakhstan.

In 2024, Kazakhstan’s economic growth is expected to slow to 3.1 percent, mostly due to delays in expanding the Tengiz oil field, while inflation, which is still well above the authorities’ target, would continue to decline. A current account deficit of 3.9 percent of GDP is projected for 2024, and the banking sector should remain sound amid easing financial conditions. In the medium-term, non-oil GDP growth would stabilize at around 3½ percent, and inflation would ease gradually to reach 5 percent by 2026–27, assuming accelerated reform implementation. `

Risks to the outlook remain tilted to the downside and include: delayed reform implementation; oil price declines, further delays in the Tengiz field expansion, and disruptions to oil exports through the Caspian Pipeline Consortium (CPC) pipeline; slow growth in trading partners; spillovers from the war in Ukraine and geo-economic fragmentation; and, increased social tensions. Upside risks include accelerated reform implementation, higher oil prices, and higher-than-expected foreign investment in new sectors.

The authorities have continued their efforts to secure macroeconomic stability. The National Bank of Kazakhstan maintained tight monetary policy throughout 2023. The authorities remain committed to medium-term fiscal consolidation and have undertaken significant efforts to increase trade diversification and address governance and corruption vulnerabilities. A recently adopted climate strategy prioritizes the development of renewable energy sources to help reduce carbon emissions from currently high levels. With slow structural reform implementation in recent years, the state’s footprint in the economy remains large.

According to the recently completed Financial Sector Assessment Program (FSAP), the banking system appears well-capitalized in aggregate. Kazakhstan is exposed to transition risk from domestic and global climate policies. Banking supervision has become more risk-based, but related party transactions remain challenging to monitor and consolidated supervision is still incomplete.

Finally, there remain gaps in the financial safety nets and crisis management arrangements.

Executive Board Assessment[2]

Executive Directors agreed with the thrust of the staff appraisal. They positively noted Kazakhstan’s economic resilience in the face of multiple external shocks and welcomed the strong growth in 2023. Noting that risks to the outlook are tilted to the downside, Directors called for continued prudent macroeconomic policies and accelerated implementation of structural reforms to maintain strong and resilient growth.

Directors welcomed the authorities’ commitment to fiscal consolidation which would support disinflation and help preserve buffers. They underscored that the planned introduction of new tax and budget codes is an opportunity to enhance non-oil revenues and public financial management. Directors also welcomed the reinstatement of the fiscal rules in 2024 and stressed that the rules should be simplified and better enforced, including through the creation of an independent fiscal council and stronger escape clauses. Swift implementation of the recommendations from the recent Fiscal Transparency Evaluation would enhance public data quality.

Directors welcomed the declining trend of inflation. They urged the National Bank of Kazakhstan (NBK) to continue to maintain a cautious and data dependent approach by keeping monetary policy tight until inflation is close to target and inflation expectations are well anchored. Directors also recommended strengthening the credibility and effectiveness of the monetary policy framework, including by improving the NBK’s governance and independence. They encouraged a careful analysis of the macro-financial implications and governance requirements of the Digital Tenge before its full public launch.

Reflecting the findings from the recently completed Financial Sector Assessment Program (FSAP), Directors welcomed the overall soundness of the financial sector and progress in risk-based supervision. They supported the FSAP’s recommendations to continue strengthening financial resilience and policy frameworks. Efforts could focus on closing data gaps, upgrading the bank resolution and crisis management framework, and reinforcing the independence, powers, and resources of the resolution authority, supported by capacity development.

Directors encouraged the authorities to accelerate structural reforms to boost competitiveness, promote diversification and sustain stronger long-term economic growth. Key priorities include downsizing the state footprint in the economy and improving public sector governance, reducing corruption-related vulnerabilities, addressing infrastructure gaps and removing trade distortions.

Directors emphasized the importance of accelerating reforms to strengthen climate resilience and meet the authorities’ carbon emission targets by 2030. They also called for close monitoring of climate-related risks in the financial sector.


Kazakhstan: Selected Economic Indicators, 2021­–25

2021

2022

2023

2024

2025

(est.)

(proj.)

(proj.)

Output

Real GDP growth (%)

4.3

3.2

4.8

3.1

5.7

Real oil

-0.6

-1.7

7.1

0.1

14.4

Real non-oil

5.5

4.7

4.2

3.9

3.4

Crude oil and
gas condensate production
(million tons)

85.7

84.2

90.0

90.3

103.0

Employment

Unemployment (%)

4.9

4.9

4.8

4.8

4.8

Prices

Inflation (%, eop)

8.4

20.3

9.8

7.7

6.2

General government finances

Revenue (% GDP)

17.1

21.8

23.1

20.7

20.6

Oil revenue

4.3

8.0

6.4

5.3

5.4

Non-oil revenue

12.9

13.8

16.7

15.4

15.1

Expenditures (% GDP)

22.1

21.7

22.9

21.8

21.5

Fiscal balance (% GDP)

-5.0

0.1

0.1

-1.2

-0.9

Non-oil fiscal balance
(% GDP)

-9.3

-7.9

-6.3

-6.4

-6.4

Gross public debt (% GDP)

25.1

23.5

22.7

23.0

25.1

Net public debt (% GDP)

-3.0

-1.2

-1.0

-0.4

-0.1

Money and credit

Broad money (% change)

20.8

13.9

16.4

17.3

14.0

Credit to the private sector (% GDP)

24.4

21.5

17.0

18.2

16.7

NBK policy rate (%, eop)

9.8

16.8

15.8

…

…

Balance of payments

Current account (% GDP)

-1.4

3.1

-3.5

-3.9

-2.3

Net foreign direct investments
(% GDP)

-1.0

-3.6

-3.4

-3.3

-3.6

NBK reserves
(in months of next year's imports of G&S)

6.9

5.9

6.0

5.8

5.9

NFRK assets (% of GDP)

28.1

24.7

23.7

23.4

25.2

External debt (% GDP)

83.3

71.7

65.6

61.7

58.7

Exchange rate

Exchange rate
(y-o-y percent change; Tenge per U.S. dollar; eop)

2.6

6.8

-1.6

…

…

Sources: Kazakhstani authorities and
Fund staff estimates and projections.


[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of

Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers

used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm.

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