Press Release No. 15/400

Press Release: Statement by the IMF Director Masood Ahmed at the Conclusion of a Visit to Kazakhstan

September 4, 2015

Mr. Masood Ahmed, Director of the IMF’s Middle East and Central Asia Department visited Kazakhstan on September 2–4, for meetings with the authorities and other stakeholders. At the conclusion of his visit, Mr. Ahmed made the following statement:

“It has been a great pleasure to visit Kazakhstan and to meet Prime Minister Massimov, National Bank Governor Kelimbetov and other senior officials. We exchanged views on the impacts of lower oil prices, the slowdown in Russia and China, and spillovers from volatility in global financial markets. We focused on how to improve growth prospects over the near and medium term and the policy response needed to withstand future shocks.

“Like other countries in the region, Kazakhstan has been hit by large external shocks (oil prices, Russia and China slowdown). Against the backdrop of these shocks, economic growth has decelerated sharply and financial conditions have tightened. As a result, the growth outlook has weakened. However, I was impressed by the authorities’ determination to put in place the policies needed to ensure macroeconomic and financial stability.

“In this regard, we welcome the recent action by the National Bank to float the tenge. Greater exchange rate flexibility, together with new monetary policy instruments, will enhance the policy framework and reduce pressures on reserves buffers, which have increased in the past two years. It is now critical that the authorities support this move by speeding up efforts to build confidence. Indeed, they have now introduced an effective new policy interest rate supported by open market operations. To ensure financial sector soundness, we agreed on the importance of strengthening banking sector supervision and the use of macro-prudential policies. We also discussed the importance of clear and consistent communication to anchor expectations about policy intentions and operations. The IMF is providing further technical assistance in support of the authorities’ goal of adopting an inflation targeting regime over the medium term.

“The current fiscal stimulus package is a sensible response to the sharp economic slowdown, and we agreed on the need for a credible medium-term path of fiscal consolidation, especially as the shocks appear to persist and could endanger fiscal sustainability.

“These actions should be complemented by decisive implementation of bold structural reforms. Priority areas include strengthening human capital, building institutions, bolstering the rule of law, enhancing financial intermediation, and improving the business climate. Close collaboration with the multilateral development banks (MDBs) in these areas should facilitate greater efficiency in the procurement and implementation process. Moreover, diversification away from the oil sector and the reduction of the state footprint in the economy are necessary conditions to ensuring successful implementation of the broader private-sector-led growth strategy.

“The IMF has had fruitful cooperation with the Kazakhstani authorities over the years and will continue our commitment to help Kazakhstan and its people. I am grateful to the authorities for their hospitality and constructive dialogue during my visit.”