The growth forecast for 2025 is questionable, and the rules for withdrawals from the National Fund need to be tightened.
During the discussion of the bill, deputies proposed 136 amendments. Senator Sultanbek Makezhanov explained that the Ministry of National Economy's forecast for basic macroeconomic indicators for 2025 at 5.6% is dubious and inflated. This is supported by the situation with the main reserves for GDP growth: industrial output increased by only 2.6% over the first ten months of 2024, while oil production has decreased. GDP growth is sustained by an increase in government spending, particularly in agriculture and construction, while the mining and manufacturing sectors are growing more slowly.
Increased government spending contributes to rising inflation, and likely the "inflation corridor for 2025, set between 5.5-7.5%, will remain a slogan," the deputy added.
According to Makezhanov, the government continues to fund projects through withdrawals from the National Fund despite weak tax collection. In 2025, the total volume of transfers from the National Fund is expected to decrease to 5.2 trillion tenge, which exceeds the fund's expected revenues of 4.8 trillion tenge by about 500 billion tenge.
The guaranteed transfer to the budget for the years 2025-2027 will amount to 2 trillion tenge annually. The net foreign assets of the National Fund are projected to reach $62.2 billion in 2025 and $69.9–78.7 billion in 2026-2027, as reported to the senators by the Minister of National Economy Nurlan Baibazarov.
The lack of a strict regulation to limit withdrawals from the National Fund allows, according to Makezhanov, for their increase. As an example of arbitrary use of targeted transfers from the National Fund, he pointed to the financing of subsidies in 2025 amounting to 1.6 trillion tenge. This uncertainty regarding targeted transfers has drawn criticism, for instance, from Fitch Ratings. Analysts from the agency state that the nature of these transfers negatively impacts macroeconomic forecasts and Kazakhstan's rating, which could adversely affect its investment attractiveness.
“The inflow of foreign direct investments is indeed declining. Therefore, the Senate considers it necessary to ‘tighten budgetary rules, allowing transfers from the National Fund only during periods of economic decline. It is essential to limit the use of these funds by establishing covenants in a specific percentage ratio from all expenditures of the republican budget linked to a counter-cyclical budget policy,’” said Makezhanov.
Budget revenues from the main sources—tax revenues—are expected to reach “15.1 trillion tenge in 2025. This is 3 trillion tenge more than in 2024; however, for the first nine months of 2024, plans for corporate tax were fulfilled by 82%, and for VAT by 70%. It is anticipated that next year there will be an increase of over 2 trillion tenge in these categories,” the deputy noted, pointing to the dubious data.
The main reasons for the decline in budget revenues for 2024, such as the slowdown in the global economy, falling prices for export goods, and decreased oil production, may persist into 2025. Moreover, the manufacturing sector, which should generate new sources for budget replenishment, is growing modestly.
Kazakhstan's national debt, according to Makezhanov, is at a safe level, but 2.5 trillion tenge has been allocated in the 2025 budget for its servicing. This is critical. Debt servicing should not exceed 10% of budget expenditures, but in 2025, this figure will be 9.7%, while in 2026 and 2027 it will be 9.9% each.
Expenditures for the repayment and servicing of non-government loans backed by state guarantees are also on the rise. For example, non-government loans for the construction and reconstruction of roads are not included in the national debt but are fully repaid by the government. JSC “Kazavtozhol,” with loan obligations amounting to 180 billion tenge, annually requests 585.4 billion tenge for 2025-2027, which is not included in the budget proposal.
Over the past three years, Samruk-Kazyna has transferred only 9-15% of dividends to the budget.
The “Samruk-Kazyna” fund has transferred dividends from 9% to 15% of net profit to the budget over the last three years, while the management of state assets is opaque and difficult to analyze, stated Senate Deputy Sergey Karplyuk during the budget debates for 2025-2027.
He noted that, in addition to direct dividend transfers, the government requires the fund to finance projects unrelated to its profile: sports, housing construction, and medical institutions.
“In addition, the republican budget funds, in general, the quasi-state sector for increasing charter capital and financing investment projects. For instance, 162 billion tenge was allocated from the budget for the passenger car production project in 2023, and another 65.5 billion tenge is planned for 2025. Thus, the management policy of state assets appears unproductive, opaque, and complex for analysis,” added Karplyuk.
Certainly, some short-term issues are being resolved, but these funds “go outside the budget,” and the resource of the fund is being spent unproductively, while it should focus on its own development, the deputy noted.
Kazakhstan needs to place greater emphasis on the development of private business to ensure a 6% growth over the next 10-15 years, stated Senate Speaker Maulen Ashimbayev. It is believed that within the usual paradigm, “Samruk-Kazyna” represents dividends, and the fund develops the economy. “But how relevant is this paradigm today to the strategic tasks facing the country?—Kazakhstan is building a market economy, gradually privatizing part of the quasi-state sector, reducing its share, transferring it to Kazakh entrepreneurs and foreign investors, and establishing a normal market system,” the Senate Speaker reminded.
In this paradigm, where “Samruk-Kazyna” is responsible for a large part of the economy, the fund is inherently limited and has shortcomings because the quasi-state sector is dependent on the budget. In 2023, the government, according to the Senate head, “injected about 1 trillion tenge into the ‘Samruk-Kazyna’ fund, not counting the funds coming from the National Fund. Therefore, in any case, to ensure long-term, quality growth of 6% through diversified growth across sectors, it is necessary to develop private business, attract investors, and privatize state enterprises.”
In this direction, all tasks are clearly outlined in the president's decree from May. Parliament and the government must effectively implement the norms set forth in this document. And if fundamentally, the share of the “Samruk-Kazyna” fund will gradually decrease, it will be almost a continuation of state institutions and will develop within this paradigm,” concluded the Senate Speaker.
“In light of our president's directives, we needed to closely examine the role of the state, its influence on the economy, and participation in the economy, and look at the mechanisms for supporting business, where serious reforms are evidently needed,” said Ashimbayev later that same day during a discussion on the Taldau Talks podcast.
T25 trillion in social fund assets in Kazakhstan are used by managers in unknown ways.
The assets of social funds: the medical insurance fund (FIMS), social insurance, and the Unified National Pension Fund (ENPF) exceed the entire expenditure part of Kazakhstan's budget and amount to more than T25 trillion, and it is unclear how these funds are being utilized by their managers, stated Ashimbayev.
“A very important question is the control over the expenditure of these fund resources. (…) If in 2024 the budget expenditure part is T24 trillion, the assets exceed T25 trillion. And they continue to grow. Huge amounts are accumulated in these funds. And there is a question of control and use of these funds,” said Ashimbayev.
According to him, when the Senate examines the execution of the country’s budget, it receives “a report on these funds, a table, on one page.” It is difficult to understand what is happening from this.
In this situation, Parliament does not control these expenditures. “To what extent does the ministry (MTSZN RK – bizmedia.kz) have the ability to monitor how fund managers are using these resources?” asked the Senate head.
Currently, the Senate and government cannot find funding for heat energy, while significant amounts are accumulated in the funds. These funds should be controlled and used for national purposes, explained Ashimbayev.
“Part of these funds is again used to cover the budget deficit. The same story. How is the other part of these funds used?—We do not see this in Parliament. I do not think the ministry has full control of the situation: what expenditures, where the money goes. Therefore, actions must be taken to ensure that the government controls expenditures and that they primarily serve our common goals,” summarized Ashimbayev.
Additionally, the government is overpaying by 40% or more