Kazakhstan : Enhancing the Fiscal Framework to Support Economic Transformation
Kazakhstan benefited from the oil boom of 2000–14 that led to income growth and poverty reduction and helped build a fiscal cushion to stabilize the economy during downturns. During this period, nominal GDP per capita increased ten-fold, from US$1,...
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| Format: | Report |
| Language: | English |
| Published: |
World Bank, Washington, DC
2017
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| Online Access: | http://documents.worldbank.org/curated/en/406131511790097777/Kazakhstan-Enhancing-the-fiscal-framework-to-support-economic-transformation-public-finance-review http://hdl.handle.net/10986/28939 |
| Summary: | Kazakhstan benefited from the oil boom
of 2000–14 that led to income growth and poverty reduction
and helped build a fiscal cushion to stabilize the economy
during downturns. During this period, nominal GDP per capita
increased ten-fold, from US$1,229 in 2000 to US$12,807 in
2014, mainly due to price effects from currency appreciation
that followed an expansion of the oil sector. Income growth
led to a substantial decline in the poverty rate, from 77
percent in 2001 to 16 percent in 2014. As oil output more
than doubled and the oil price super-cycle emerged, the
Government of Kazakhstan (GoK) accumulated substantial
fiscal savings in its oil fund, the National Fund of the
Republic of Kazakhstan (NFRK).2 Fiscal savings in the NFRK
peaked at US$73 billion (33 percent of GDP) at end-2014. A
portion of these funds was used for anti-crisis programs in
2007-10, during which time the fiscal stimulus program
totaled US$18 billion (about 15 percent of GDP). The
authorities must urgently adopt and start implementing a
fiscal consolidation strategy and refocus macro-fiscal
policy on promoting diversified growth and high-quality job
creation. The countercyclical fiscal stance adopted in 2014
led to an increase in the nonoil fiscal deficit (NOD), which
is too high to ensure medium-term fiscal sustainability and
threatens the long-term growth potential of the nonoil
tradable economy. Successful fiscal consolidation would
require: (i) reducing inefficient expenditure that distorts
private incentives while redirecting savings toward
productivity-enhancing spending; and (ii) eliminating
inefficient tax benefits that result in an uneven playing
field for investment. While pursuing a fiscal consolidation
effort over the medium term, there are potential benefits to
reviewing Kazakhstan’s fiscal policy framework and
institutions with the goal of strengthening their coherence,
credibility, and flexibility. This Public Finance Review
(PFR) aims to help the authorities identify areas for fiscal
consolidation that will bring about fiscal sustainability in
the medium term and support economic transformation in the
long run. While developing a fiscal consolidation strategy,
the authorities should address four policy areas to enhance
fiscal sustainability and support economic transformation.
These are discussed in the following four policy focus
chapters: (i) enhancing the credibility of the fiscal policy
framework; (ii) improving public spending efficiency and
effectiveness; (iii) mobilizing nonoil revenue and
optimizing the tax system; and (iv) strengthening fiscal
policy institutions. |
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