KAZAKH BUDGET WELL AHEAD OF TARGETS…

Kazakhstan’s budgets are awash in cash due to the high prices and increasing volume of commodity exports and their effect on enterprises’ bottom lines. In the first eight months of 2000, consolidated budget revenues (including central and local budgets) were 377.3 billion tenge (US$2.66 billion), 72.5 percent of the annual target and up 66.8 percent year-on-year. Targets were overshot largely as a result of revenue from corporate income tax, which was 98.8 billion tenge or 201.4 percent of planned revenue for the eight-month period. VAT provided 53.3 billion tenge or 9.9 percent more than planned. Total expenditures in the first eight months were 336.4 billion tenge (US$2.37 billion) or 58 percent of targeted spending for the year and up 44.9 percent year-on-year. This resulted in a surplus of 40.9 billion tenge (US$288 million or 2.7 percent of GDP) (Russian agencies, October 17).

The consolidated budget for 2000 targeted revenue at 482.1 billion tenge (22.7 percent of GDP) and spending at 545 billion tenge (25.7 percent of GDP), and thus a deficit of 63.8 billion tenge (3.0 percent of GDP). With higher growth and tax revenues and lower expenditures, due, in part, to slower than projected inflation and a stronger than projected currency, the government is under pressure from the IMF and other sources to use its windfall to reduce the deficit. While a deficit of 2.7 percent of GDP has been proposed by a government-supported draft in parliament (RFE/RL, October 12), the actual deficit this year might be substantially less. With foreign investors willing to finance Kazakhstan’s deficits and no debt to the IMF, there is less external pressure to tighten fiscal policy. Nevertheless, it is likely that Kazakhstan, even in its favorable position, will wish to remain in the good graces of international lenders and investors, as it has in the past, and heed IMF suggestions on fiscal policy.

The Kazakh government is targeting a consolidated budget deficit of 2.2 percent in 2001 with revenue equal to 22.4 percent of GDP and spending of 24.6 percent of GDP. These deficits are in line with a three-year development program approved in 1999 which targeted budget deficits of 2.2 percent of GDP in 2001 and 1.2 percent of GDP in 2002. In late October President Nursultan Nazarbaev clarified that budget deficits in 2002 and beyond should not exceed 1.5 percent of GDP (Russian agencies, October 30). We expect the Kazakh government to adhere to these guidelines as long as the economic situation remains relatively strong.

…WHILE KAZAKHSTAN SEEKS TO FURTHER IMPROVE FISCAL POLICY.