The Analytical Center of the Association of Financiers of Kazakhstan (AFK) has presented an overview of the budget balance of the Republic of Kazakhstan (RK) for 2024.
Key Trends of the Period
Despite economic growth (+4.8%), the total tax revenues across the country, including contributions to the National Fund (NF), local budgets (LB), and the republican budget (RB), remained virtually unchanged by the end of 2024, amounting to 23.5 trillion tenge (+0.2% or 40 billion tenge).
However, the situation varies across different segments (see below). Tax revenues decreased in the NF (-16% or 748 billion tenge) and RB (-5% or 605 billion tenge), but increased in LB (+23% or 1.4 trillion tenge), which balanced the overall collections.
In the National Fund, a significant decline was noted in corporate income tax (CIT) (-267 billion tenge) and mineral extraction tax (MET) (-602 billion tenge) against the backdrop of lower oil prices, decreased production, and exports.
In the republican budget, the drop was seen in CIT (-236 billion tenge) and value-added tax (VAT) (-495 billion tenge) due to reduced revenues from several major enterprises, lower prices for exported metals, and decreases in taxable oil exports (-4%) and imports (-4.4%), alongside a substantial increase in VAT refunds (1.2 trillion for 2024 compared to 430 billion tenge for 2023).
Local budgets saw the highest growth from social tax (+258 billion tenge), CIT from small and medium-sized businesses (SMEs) (+404 billion tenge), and personal income tax (PIT) (+459 billion tenge), driven by an increase in nominal wages (+11.3%) and the growth in the number of entities (+10 thousand) and revenues from SMEs (for instance, gross profit among small enterprises rose by 20% over the first nine months of 2024).
Support for the revenue side of the republican budget last year came from non-tax revenues (1.2 trillion tenge, mainly from dividends on state-owned shares) and high transfers from the National Fund (5.6 trillion tenge). Consequently, total revenues increased to 19.6 trillion tenge (+3.1% or 586 billion tenge), with taxes accounting for only 63%.
With total assets in the National Fund at 33.1 trillion tenge, withdrawals totaling 5.6 trillion tenge represented 17% of its assets, significantly limiting their growth. Potential restrictions on targeted transfers from the National Fund (not exceeding 30% of the guaranteed tranche of 2 trillion tenge) would allow for withdrawals of about 2.6 trillion tenge.
In addition to further restrictions on withdrawals to strengthen the role of the National Fund in the country’s economic stability, adherence to the 24 fundamental "Santiago Principles," which serve as a benchmark for transparency and effectiveness in managing sovereign funds, is necessary. The principles governing the completeness and accessibility of disclosed information (Principles 11, 17, and 23), mandatory independent audits (Principle 12), and strategic adaptation of best global practices in investment management (for instance, the Norwegian National Fund has a share in equities (70%) that significantly exceeds the share in bonds (27%)), as well as the allocation of a share for digital assets, gain particular importance.
While tax collections across the country remained stable, expenditures (RB+LB) continued to grow steadily: government expenditures increased by 13.4% or 4.1 trillion tenge — to 34.7 trillion tenge, exceeding the revenue side by 24% or 7.6 trillion tenge (see below for dynamics of RB and LB expenditures by direction).
Current expenditures still dominate the expenditure structure (85%, see below). The situation may change due to the government's intention to direct additional tax collections towards development.
Against the backdrop of a high rate of attracting public debt (7.5 trillion tenge), both the costs for servicing and repaying this debt (increasing from 4.4 to 5.9 trillion tenge) and its total volume (from 27.2 to 31.8 trillion tenge) are rising.
Notably, three-quarters of the volume of government securities issued in 2024 was directed to the domestic market, reducing potential currency risks. However, proposed changes in the taxation of income from investments in government securities could have serious implications for their attractiveness to local institutional investors and for the Ministry of Finance's ability to issue large volumes of domestic debt (without increasing the premium).
1 2 3 4 5 Summary
In 2024, the budget deficit significantly widened, increasing by almost 30% to reach 3.6 trillion tenge (compared to 2.8 trillion tenge in 2023). The primary cause was the accelerated growth of government expenditures against insufficient growth in tax and non-tax revenues.
Stabilization of public finances continued to be supported by transfers from the National Fund, which increased to 5.6 trillion tenge (4.1 trillion tenge in 2023), as well as significant borrowing, amounting to 7.5 trillion tenge (5.5 trillion tenge the previous year).
At the same time, favorable conditions in financial markets — rising stock and bond prices, as well as gold prices — led to a substantial increase in investment income for the National Fund, reaching 5.0 trillion tenge (up from 1.8 trillion tenge the previous year). Combined with tax revenues to the fund (3.8 trillion tenge), this allowed its assets to grow from 29.9 trillion tenge to 33.1 trillion tenge (+11% or 3.2 trillion tenge). As a result, they now represent 24.7% of GDP, compared to 25.0% the previous year.
In government budget expenditures, the main increase was attributed to debt servicing and repayment (+1.4 trillion tenge) amid rising debt volumes and high-interest rates. Consequently, the share of this item in expenditures rose to 16.9% from 12.9% previously.
High planned volumes of borrowing (6.9 trillion tenge, only in the domestic market) and repayment (this year, 2.5 trillion tenge of eurobonds must also be repaid) will elevate this item to leadership not only in terms of growth rates but also in terms of its share in expenditures (currently, education leads with 19.3%). Furthermore, plans regarding the taxation of income from owning government securities may lead to even higher expenditures (increased premium to offset taxes).
Meanwhile, the goal of raising the National Fund's assets to 100 billion dollars by 2029 and the prolonged budget deficit necessitate urgent and immediate measures to improve the budget balance. Discussed reforms to the tax system should also include assessments of the effectiveness of its expenditures, phasing out ineffective incentives, and improving budget discipline to stabilize inflation and the exchange rate.
It should be noted that, according to the National Bank's calculations, an average increase in budget expenditures of 1% this month will lead to a total increase in imports of 1.42% over five months due to the multiplicative effect of government expenditures on the overall expenditures of economic entities. Therefore, it is crucial that the growth rate of budget expenditures does not exceed 8% in accordance with budgetary rules (not exceeding the average GDP value over 10 years of 3% considering the inflation target of 5%).