BUDGET PASSAGE, “BLUE CHIP” SALES SHOULD BOLSTER KAZAKHSTAN’S FISCAL BALANCE.

The November 5 approval of the 2000 budget by Kazakhstan’s parliament (Majlis) has important implications for Kazakhstan’s fiscal balance this year and next (Reuters, November 5). The budget’s passage is likely to lead to the finalization of a three-year US$350-400 million IMF standby agreement, which could in turn allow Astana to receive up to US$200 million in World Bank assistance by the end of 1999. Combined with revenues from Kazakhstan’s US$200 million Eurobond sale in September and from sales of stakes in leading “blue chip” oil and metallurgical firms, funds released by the IMF agreement should allow Astana to plug some large holes in its fiscal accounts by the end of the year.

Kazakhstan’s 1999 budget, which underwent multiple revisions due to the recession after the August 1998 Russian financial crisis, calls for a deficit of 67 billion (US$480 million), or 3.6 percent of GDP. Kazakhstan must also repay US$550 million in foreign debt principal which is not included in the 1999 budget. The July expiration of Kazakhstan’s previous US$450 million three-year IMF standby agreement had raised sharp questions about Astana’s abilities to meet its obligations. So did the fact that privatization revenues slated at 59 billion tenge (US$420) for the year have lagged in the aftermath of the Russian crisis.

Along with the revenues from the September Eurobond sale, Prime Minister Kasymzhomart Tokayev’s interim government intends to plug its fiscal holes by completing the “blue chip” privatization program scheduled for 1999. The government is currently reviewing investor bids for state holdings in some of Kazakhstan’s leading companies, including the Mangistaumunaigaz and Aktobemubaigaz oil firms, the zinc producer Kazzinc and the Kazakhmys copper firm. Kazakhstan’s treasury is likely to receive revenues from these sales by the end of the year (Russian agencies, Central Asia and Caucuses Business Report, October 25-31). However, the resumption of IMF and World Bank lending has been conditional on the passage of the 2000 budget, which calls for a further reduction in the deficit to 3.0 percent of GDP. Thanks to the Majlis’s approval of the budget, a new IMF agreement is likely to be formally concluded soon. This could allow the World Bank to release a US$200 million credit which Astana has requested to help plug its fiscal holes.

These developments have also made the controversial sale of 10 percent of the government’s 25 percent stake in the Tengizchevroil oil venture less likely. This sale, originally proposed by former Prime Minister Nurlan Balgimbaev, was criticized by opponents who argued that Astana’s fiscal tensions could be resolved without surrendering the stake, which is worth an estimated US$1 billion. If the blue chip sales and multilateral lending do not proceed as planned, however, Astana may have no alternative to the Tengizchevroil sale.

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