Kazak Budget Stays Tight Despite Pressure to Spend
Kazak Budget Stays Tight Despite Pressure to Spend
As reports circulated that social spending in Kazakstan was to receive a substantial boost, the debate on the government’s 2007 budget generated a lot of public interest. NBCentralAsia’s economic experts say policymakers have held back from allowing a massive injection of funds into the social sector because of fears that it would drive up inflation.
The budget was passed by parliament on November 13. With revenues put at 1.98 trillion tenge or 15.5 billion US dollars (in current prices) and spending at 2.13 trillion tenge, the deficit will be 145 billion tenge (1.1 billion dollars), which should come out at an acceptable 1.2 per cent of anticipated gross domestic product.
In a speech last March, President Nursultan Nazarbaev announced that social-sector spending would increase substantially from 2007. However, when the Majilis or lower house of parliament reviewed the document in early October, there was some concern that the spending rise was not going to be as dramatic as initial reports had suggested, with an 18 per cent increase that compared unfavourably with the 27 per cent rise expected on the revenue side.
Petr Svoik, an NBCentralAsia economic expert, point to two major factors constraining the release of more funds for the social sector. First, the government is worried that higher spending could push up inflation. Second, spending in certain public-sector areas has been inefficient in the past.
Parliamentary discussions on the budget during its first reading on November 7-8 resulted in an additional 235 million tenge being re-allocated to three social-sector areas – development of Kazak, the state language, agriculture, and subsidies for fuel and lubricants - without changing the headline expenditure figure. As the head of parliament’s finance and budget committee, Kenjegali Sagadiev, explained, “A decision was taken to leave revenues unchanged, and to finance the budget amendments proposed by deputies by re-allocating funds on the expenditure side, and also by increasing the deficit forecast.”
Kazakstan-based economic observers suggest that in addition to these three priority areas, there are other, no less important areas that are similarly underfunded, including maintaining state-owned housing stock, repairing and modernising the heat, electricity and water distribution companies, and providing drinking water to desert regions.
The 2007 budget is designed to fit a new set of rules whereby all oil revenues will from now on be placed in the National Fund of Kazakstan, which will then transfer money to the central government budget in measured doses. The hope is that this will reduce the distorting effects that the mineral resources sector has on the rest of the economy.
However, NBCentralAsia analysts note that the plan to transfer 300 billion tenge or 2.3 billion dollars from the National Fund to the government budget is a telling - and worrying - sign that mineral resource-sector finances are in surplus to a dangerous extent, while the rest of government finances are badly in deficit.
“These two parts [of state finances] are linked by a bridge called the National Fund,” said Svoik. “It all creates the appearance of prosperity, yet that prosperity is founded solely on the high [world] prices of mineral resources.”
(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)
The budget was passed by parliament on November 13. With revenues put at 1.98 trillion tenge or 15.5 billion US dollars (in current prices) and spending at 2.13 trillion tenge, the deficit will be 145 billion tenge (1.1 billion dollars), which should come out at an acceptable 1.2 per cent of anticipated gross domestic product.
In a speech last March, President Nursultan Nazarbaev announced that social-sector spending would increase substantially from 2007. However, when the Majilis or lower house of parliament reviewed the document in early October, there was some concern that the spending rise was not going to be as dramatic as initial reports had suggested, with an 18 per cent increase that compared unfavourably with the 27 per cent rise expected on the revenue side.
Petr Svoik, an NBCentralAsia economic expert, point to two major factors constraining the release of more funds for the social sector. First, the government is worried that higher spending could push up inflation. Second, spending in certain public-sector areas has been inefficient in the past.
Parliamentary discussions on the budget during its first reading on November 7-8 resulted in an additional 235 million tenge being re-allocated to three social-sector areas – development of Kazak, the state language, agriculture, and subsidies for fuel and lubricants - without changing the headline expenditure figure. As the head of parliament’s finance and budget committee, Kenjegali Sagadiev, explained, “A decision was taken to leave revenues unchanged, and to finance the budget amendments proposed by deputies by re-allocating funds on the expenditure side, and also by increasing the deficit forecast.”
Kazakstan-based economic observers suggest that in addition to these three priority areas, there are other, no less important areas that are similarly underfunded, including maintaining state-owned housing stock, repairing and modernising the heat, electricity and water distribution companies, and providing drinking water to desert regions.
The 2007 budget is designed to fit a new set of rules whereby all oil revenues will from now on be placed in the National Fund of Kazakstan, which will then transfer money to the central government budget in measured doses. The hope is that this will reduce the distorting effects that the mineral resources sector has on the rest of the economy.
However, NBCentralAsia analysts note that the plan to transfer 300 billion tenge or 2.3 billion dollars from the National Fund to the government budget is a telling - and worrying - sign that mineral resource-sector finances are in surplus to a dangerous extent, while the rest of government finances are badly in deficit.
“These two parts [of state finances] are linked by a bridge called the National Fund,” said Svoik. “It all creates the appearance of prosperity, yet that prosperity is founded solely on the high [world] prices of mineral resources.”
(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)
