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Fitch Ratings: New Kazakhstan President Maintains Economic Policy Settings
Fitch Ratings-London-24 July 2019: Kazakhstan's President Kassym-Jomart Tokayev looks set to pursue the main economic policy priorities of his predecessor, Fitch Ratings says. These included structural reforms and, more recently, increasing social spending.

We expected policy continuity following Tokayev's landslide victory in June's presidential election. He had taken over as interim president following the resignation in March of the previous president, Nursultan Nazarbayev, after 30 years in office. Tokayev is a long-standing Nazarbayev ally and former prime minister. Nazarbayev will retain considerable influence as chairman of the Security Council and president of the Nur Otan party (he endorsed Tokayev as the party's presidential candidate).

Kazakhstan's parliament in July adopted the national budget for 2019-2021. The budget enacts the large programme of social expenditure announced by Nazarbayev in February 2019 that includes a 50% increase in the minimum wage, tax cuts for low-income earners, and investment in housing and transport infrastructure. It continues to target a close-to-balanced budget by 2021, and reductions to the non-oil deficit.

Government debt is low and favourable oil prices will help to contain the budgetary impact of higher government spending. Higher oil prices and output boosted fiscal receipts in 2018, helping to shrink the consolidated general government deficit to an estimated 0.6% of GDP from 6.4% in 2017, when support for the banking sector led to a surge in public expenditure.

We forecast the unconsolidated central government deficit to widen to 2.1% of GDP (from an estimated 1.4% in 2018). Tokayev may seek to consolidate his popularity with further increases in social and investment spending. Following the election, he has asked the prime minister to develop new social policy initiatives and measures to boost employment.

Tokayev has also announced debt relief 'for people who find themselves in very difficult living circumstances', telling Bloomberg on 26 June that the initiative would target 3 million Kazakhs, or 16% of the population. It will cost about KZT105 billion (USD274 million, or 0.17% of GDP). In the same interview, he said there should be no more government bailouts for privately owned Kazakh banks.

The debt-relief program will be financed from the recent targeted transfers (which are allocated to specific measures) from the National Fund of the Republic of Kazakhstan (NFRK) to the budget, amounting to KZT370 billion. The government in April 2019 increased the yearly guaranteed NFRK transfers for 2019-2021 to KZT2.7 trillion. Its medium-term fiscal target aims to cut transfers to KZT2 trillion by 2020, from KZT2.6 trillion in 2018.

The clean-up of Kazakhstan's banking sector has continued in 2019, with the state-owned Problem Loan Fund purchasing an additional KZT604 billion of distressed assets from Tsesnabank, using proceeds from bonds subscribed by the central bank. Given the levels of bad loans (mostly deep-seated legacy loans to corporates) at end-2018 revealed by IFRS 9 disclosures, we think some medium-sized banks could require fresh capital injections or other forms of external support (such as sales to the Problem Loan Fund) to absorb potential additional impairment losses.

We think off-government balance sheet transactions could be used again to fund further government bank support if it were needed; for example, following the central bank's Asset Quality Review, due by end-2019.

We expect the new president will continue existing efforts to improve the business climate and institutional policymaking framework, support agriculture and the digital economy, and speed up privatisation. However, economic diversification will be slow as non-oil growth is constrained by low productivity and labour supply growth, in our view.

Kazakhstan's 'BBB'/Stable sovereign rating balances strong public and external balance sheets against high commodity dependence, a weak banking sector, weak governance relative to ratings peers, and high inflation.

26 2019 | Viewed: 26 | Press Releases | Read full
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25 2019 | Viewed: 23 | News / Theme of day | Read full
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The BOEs forecasts are losing authority with the public as well as markets, says the U.S. lender.
25 2019 | Viewed: 17 | News / Review of Mass Media | Read full
Facebook reveals new FTC antitrust investigation
Hours after settling with agency over privacy, company results disclose second probe
25 2019 | Viewed: 16 | Foreign experience | Read full
White House and Congress reach deal on debt ceiling
Two-year agreement announced by Trump would raise federal spending significantly
23 2019 | Viewed: 22 | News / Theme of day | Read full
Fed sets sights on quarter-point rate cut
Chairman Jay Powell treads cautiously in supporting US economy
22 2019 | Viewed: 28 | News / Review of Mass Media | Read full
Trump wants weaker dollar but it could be a hard sell
President Donald Trump wants a cheaper dollar, saying earlier this month the United States should match what he says are efforts by other countries to weaken their own currencies - giving them an unfair trade advantage
19 2019 | Viewed: 26 | News / Theme of day | Read full
No change to US dollar policy as of now, says Treasury chief
Steven Mnuchin says Washington could consider a different stance in future
19 2019 | Viewed: 20 | News / Theme of day | Read full
G7 urges tough Libra regulation, agrees to tax digital giants
Digital currencies such as Facebooks planned Libra raise serious concerns and must be regulated as tightly as possible to ensure they do not upset the worlds financial system, Group of Seven finance ministers and central bankers said on Thursday
19 2019 | Viewed: 15 | News / Review of Mass Media | Read full
Eurasian Resources Weighs Sale of Congo Mining Assets
Eurasian Resources Group Sarl, the mining firm backed by the Kazakhstan government, is exploring options for assets in the Democratic Republic of Congo including a potential sale, according to people with knowledge of the matter
19 2019 | Viewed: 15 | Foreign experience | Read full
China to tackle corruption in Belt and Road projects
Beijing plans to embed anti-graft officers in BRI ventures abroad
19 2019 | Viewed: 15 | Foreign experience | Read full
Beijing's regional economy rises to US$221b in H1
Beijing's regional GDP hit more than 1.52 trillion yuan (US$221 billion) in the first half of 2019, growing 6.3 percent year-on-year, and output by the tertiary industry rose 6.5 percent to 1.26 trillion yuan due to the strong contribution of the financial and service sectors, Beijing's statistics authority said
18 2019 | Viewed: 15 | Analytics | Read full
Chinas surplus with trading partners falls into balance
IMF says Beijing no longer a net lender to the world, easing fears of risk to global economy
18 2019 | Viewed: 19 | Analytics | Read full
Second Belt and Road joint conference set for Friday
The second Belt and Road Joint Conference will be held in Beijing on Friday, according to a government press release issued on Wednesday
17 2019 | Viewed: 15 | News / Review of Mass Media | Read full
Von der Leyen survives vote to win EU top job
Former German defence minister defies hostility to replace Juncker as commission president
17 2019 | Viewed: 27 | News / Review of Mass Media | Read full
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Sholpan Kozhamkulova
Sholpan Kozhamkulova, Ph.D., Assistant Professor, Chair, Department of Journalism and Mass Communication, KIMEP, Almaty

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