Kazakhstan macro: mixed budgetary performance in 9M24 amid lack of tax revenues

KAZAKHSTAN - Report 28 Oct 2024 by Evgeny Gavrilenkov

At the end of last week, the Ministry of Finance released its monthly budgetary statistics, which revealed the continuous underperformance in the collection of taxes linked to oil prices and the exchange rate, and the September data didn’t point to any breakthrough. However, as the overall economy continues to perform well, non-oil taxes are coming in amounts that exceed plans and expectations. Hence, regional budgets are in good shape as their taxes do not depend much on the exchange rate. A number of conclusions that can be derived from recent budgetary statistics point to the fact that government budgetary policy, with its multiple and unpredictable amendments, consistently elevates uncertainty and creates various distortions, such as continuous interventions on the FX market that don’t allow the tenge to find its equilibrium. Even though the tenge started to depreciate and drift to a more reasonable level (in October it hovered above the USD/KZT 480 level), this was not enough. Hence the permanent lack of tax revenues linked to the exchange rate.

Due to budgetary amendments and the lack of revenues, as of October 2024, actual expenditures were well below the amended 9M24 plan. The amount of delayed spending is quite significant and accounts for about 12% of the amended annual amount. Therefore, the expected spending spree in 4Q24 will likely keep inflation elevated. Another area of uncertainty stems from the fact that the government has not yet disclosed how it will be able to raise the additional revenue necessary to finance all expenditures in 2024. Will it rely on more transfers from the National Fund, or will state entities be encouraged to contribute additional “non-tax revenues”? This choice will impact the government’s FX interventions affecting the tenge. In any case, it looks as though these interventions will prevent the tenge from moving closer to its equilibrium in 4Q24—expect more from the tenge in 2025.

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