Skyrocketing Financial Gap: Kazakhstan's Budget Shortfall Surpasses $6.9 Billion in 2024
Revamped Headline: Kazakhstan's 2024 Budget Deficit Soars: A Closer Look at Factors and Consequences
ASTANA – Kazakhstan’s budget deficit reached an alarming 3.6 trillion tenge (US$6.9 billion) in 2024, accounting for 2.7% of the country’s GDP, as reported by Finance Minister Madi Takiyev at a recent Mazhilis plenary session.
(Source: mazhilis.parlam.kz)
Keyword Insight: Government debt surge
In simpler terms: The Kazakh government's budget gap widened drastically in 2024.
Preliminary statistics point to a robust 4.8% real GDP growth. Revenues approached the planned figure, reaching 20 trillion tenge (US$38.5 billion), while expenditures exceeded expectations, landing at 23.6 trillion tenge (US$45.4 billion).
(Source: Mazhilis press service)
Keyword Insight: Increased spending
In simpler terms: Despite the budget revenue being close to the planned figure, spending was higher than anticipated.
"The government has fulfilled all social obligations, including 7.1 trillion tenge (US$13.6 billion) allocated to support the regions, and 8.8 trillion tenge (US$16.9 billion) towards the social sphere," Takiyev announced. Additional funding was earmarked for flood recovery, updated heating infrastructure, and rural healthcare improvements.
(Source: Mazhilis press service)
Keyword Insight: Additional funding for various programs
In simpler terms: The government devoted substantial funds to social welfare programs, flood recovery, infrastructure projects, and healthcare improvements.
Yerlan Koshanov, Mazhilis Chairman, drew attention to the 10-year increase in government debt, from 8.7 trillion tenge (US$16.7 billion) to a staggering 30.1 trillion tenge (US$57.9 billion). The Finance and Budget Committee noted the illusion of sustainability amid warnings about the risks associated with this expansive debt load.
“If earlier the expenditure side of the budget traditionally raised the most questions, this year, unfortunately, they fall on the weak planning and execution of the revenue side of the budget. And as a result - a sharp increase in withdrawals from the National Fund and the volume of external borrowing,” Koshanov remarked.
(Source: Mazhilis press service)
Keyword Insight: Debt sustainability concerns
In simpler terms: The increase in government debt is causing worries about future financial sustainability, and it appears that problems with revenue management have contributed to this.
The final budget execution report approval will occur at a joint session of both houses of Parliament.
(Source: Mazhilis press service)
Keyword Insight: Parliament to discuss budget report
In simpler terms: The Parliament will hold a joint session to review and approve the budget report.
Gall’s Insights: Factors and Consequences Behind Rising Government Debt
- Surging Infrastructure Investments: Kazakhstan's focus on infrastructure projects, such as digital technologies, AI, agribusiness, and logistics, necessitated substantial borrowing, increasing the country's overall debt burden.
- Accumulation of Domestic Debt: Increased reliance on domestic debt issuance may leave Kazakhstan vulnerable to local market conditions and interest rates.
- External Debt to China: China-related external debt poses further risks, with Kazakhstan owing $9.2 billion to Chinese state entities.
- Economic and Global Risk Factors: Risks include delays in major infrastructure projects, inflation, global protectionism, lower oil prices, and slower growth among trading partners.
- Technical Factors Affecting Foreign Direct Investment (FDI) Outflows: Temporarily negative net FDI inflow (-$2.5 billion in 2024) stems from repatriated dividends and capital flow controls rather than a lack of investor interest.
- Potential Consequences of Illusory Debt Sustainability: Increased interest payment burden, risks of debt distress, reduced policy space, delayed corrective actions, and potential deterrence of long-term foreign investors.
In conclusion, Kazakhstan's rapid debt accumulation results from ambitious spending on infrastructure projects, heavy reliance on domestic and Chinese debt, and external economic pressures. Ignoring the potential risks posed by illusory debt sustainability could jeopardize Kazakhstan’s economic stability, making it essential for decisive action.
- The surge in infrastructure investments in Kazakhstan, including digital technologies, AI, agribusiness, and logistics, has necessitated substantial borrowing, contributing to the increase in the country's overall debt burden within the industry sector.
- The increased reliance on domestic debt issuance, as seen in Kazakhstan, leaves the country vulnerable to local market conditions and interest rates, causing potential financial implications in the business and finance sectors.
