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Kazakhstan - Enhancing the fiscal framework to support economic transformation : public finance review (English)

Kazakhstan benefited from the oil boom of 2000–14 that led to income growth and poverty reduction and helped build a fiscal cushion to stabilize the economy during downturns. During this period, nominal GDP per capita increased ten-fold, from US$1,229 in 2000 to US$12,807 in 2014, mainly due to price effects from currency appreciation that followed an expansion of the oil sector. Income growth led to a substantial decline in the poverty rate, from 77 percent in 2001 to 16 percent in 2014. As oil output more than doubled and the oil price super-cycle emerged, the Government of Kazakhstan (GoK) accumulated substantial fiscal savings in its oil fund, the National Fund of the Republic of Kazakhstan (NFRK).2 Fiscal savings in the NFRK peaked at US$73 billion (33 percent of GDP) at end-2014. A portion of these funds was used for anti-crisis programs in 2007-10, during which time the fiscal stimulus program totaled US$18 billion (about 15 percent of GDP). The authorities must urgently adopt and start implementing a fiscal consolidation strategy and refocus macro-fiscal policy on promoting diversified growth and high-quality job creation. The countercyclical fiscal stance adopted in 2014 led to an increase in the nonoil fiscal deficit (NOD), which is too high to ensure medium-term fiscal sustainability and threatens the long-term growth potential of the nonoil tradable economy. Successful fiscal consolidation would require: (i) reducing inefficient expenditure that distorts private incentives while redirecting savings toward productivity-enhancing spending; and (ii) eliminating inefficient tax benefits that result in an uneven playing field for investment. While pursuing a fiscal consolidation effort over the medium term, there are potential benefits to reviewing Kazakhstan’s fiscal policy framework and institutions with the goal of strengthening their coherence, credibility, and flexibility. This Public Finance Review (PFR) aims to help the authorities identify areas for fiscal consolidation that will bring about fiscal sustainability in the medium term and support economic transformation in the long run. While developing a fiscal consolidation strategy, the authorities should address four policy areas to enhance fiscal sustainability and support economic transformation. These are discussed in the following four policy focus chapters: (i) enhancing the credibility of the fiscal policy framework; (ii) improving public spending efficiency and effectiveness; (iii) mobilizing nonoil revenue and optimizing the tax system; and (iv) strengthening fiscal policy institutions.

Details

  • Author

    Sarsenov,Ilyas, Kostopoulos,Christos

  • Document Date

    2017/11/27

  • Document Type

    Working Paper

  • Report Number

    121677

  • Volume No

    1

  • Total Volume(s)

    1

  • Country

    Kazakhstan,

  • Region

    Europe and Central Asia,

  • Disclosure Date

    2017/11/27

  • Disclosure Status

    Disclosed

  • Doc Name

    Kazakhstan - Enhancing the fiscal framework to support economic transformation : public finance review

  • Keywords

    oil revenue;oil deficit;Program for International Student;Public Financial Management and Accountability;fiscal framework;oil price;fiscal policy framework;fiscal consolidation;impact of public spending;external current account deficit;personal income tax rate;health expenditure per capita;life expectancy at birth;reduction in tax rates;effectiveness of public spending;oil and gas industry;real exchange rate appreciation;purchasing power parity term;operation and maintenance cost;Fiscal policies;global financial crisis;net financial asset;gdp growth rate;fiscal consolidation effort;fiscal adjustment;terms of trade;Foreign Exchange Reserve;Oil & Gas;sovereign wealth fund;oil tax revenue;total public expenditure;output per worker;Fiscal Sustainability;increase tax collection;high oil price;effective tax rate;distribution of wage;business cycle fluctuation;public sector fiscal;investment and development;fiscal policy adjustment;corporate income tax;data envelopment analysis;fiscal stimulus package;comments and feedback;weights and measure;quality of health;gross public debt;Leaving the Bank;Private Sector Growth;government fiscal account;special economic zone;expansionary fiscal stance;transport infrastructure investment;international financial institution;lack of transparency;nominal exchange rate;oil price level;net present value;financial sector stability;water supply system;public sector transformation;education and health;international financial market;short-term macroeconomic stability;global value chain;Public Finance Management;permanent income hypothesis;foreign direct investment;price of oil;operations and maintenance;long-term fiscal sustainability;macroeconomic and fiscal;debt management reform;accrual basis accounting;property tax base;Job Creation;tax structure;fiscal deficit;price effect;fiscal rule;tax system;real gdp;oil sector;fiscal risk;tradable sector;Tax Exemption;budget revenue;inefficient tax;holding company;targeted transfer;job growth;investor confidence;fiscal balance;income growth;Oil Export;Exchange Rates;private incentives;transfer resource;efficiency gain;Tax Administration;long-term saving;discretionary resource;tax loopholes;sustainable level;foreign borrowing;net borrowing;dollar price;privatization program;borrowing limit;fiscal administration;banking sector;medium-size enterprise;military spending;government spending;oil fund;price shock;fiscal saving;tax incentive;macroeconomic environment;poverty dynamic;economic stabilization;fiscal discipline;adjustment strategy;national budget;banking crisis;tax benefit;long-term growth;banking system;macroeconomic adjustment;cost-benefit analysis;bank lending;housing affordability;liquidity injection;foregone revenue;fiscal cost;business sector;Economic Stimulus;industrial zone;main road;tourism infrastructure;transparent procedure;eligibility criterion;health indicator;debt security;institutional change;institutional strengthening;state administration;energy infrastructure;heat supply;housing infrastructure;capital adequacy;social housing;social infrastructure;SME sector;social taxes;oil economy;general budget;prudential regulation;stabilization purpose;agricultural potential;oil resource;Natural Resources;borrowing cost;property valuation;Economic Management;legislative package;long-term sustainability;oil wealth;profit shift;financing cost;oil expenditure;public entity;tax credit;voluntary compliance;investment allowance;fiscal transfer;target variable;local budget;long-term credit;state budget;discretionary transfer;financial independence;budget account;logistical support;fiscal revenue;budget financing;education outcome;administrative support;communication support;state guarantee;debt accumulation;time management;economic efficiency;pay taxes;residential property;agricultural enterprise;additional revenue;oil production;budget constraint;oil reserve;government sector;operations analyst;program leader;oil boom;increased transparency;oil producer

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Citation

Sarsenov,Ilyas Kostopoulos,Christos

Kazakhstan - Enhancing the fiscal framework to support economic transformation : public finance review (English). Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/406131511790097777/Kazakhstan-Enhancing-the-fiscal-framework-to-support-economic-transformation-public-finance-review