This week, Kazakhstan’s President Kassym-Jomart Tokayev shuffled his authorities. In addition to new Prime Minister Olzhas Bektenov, notable new appointments included Finance Minister Madi Takiyev, and Nationwide Economic system Minister Nurlan Baybazarov. The contemporary faces within the financial bloc come as Tokayev pledges to pursue a new economic course, together with guarantees to cut back the state’s outsized position within the financial system, enhance native manufacturing, and create a extra environment friendly, market-led setting.
Tokayev’s financial reform agenda has already begun to take form this 12 months with a string of latest insurance policies rolled out in current months, together with plans to elevate state subsidies on gas, utilities, and a few food merchandise, develop new infrastructure, and introduce a brand new, extra environment friendly Tax Code. This month, Kazakhstan’s nationwide airline, Air Astana, can be set to list on the London Inventory Change, ending an virtually decade-long “will it, received’t it” story for the reason that authorities first mooted floating its flagship service in 2016.
Astana’s motivation to reform the financial system is obvious. Final 12 months, bulging state spending and a lower-than-expected tax take meant Kazakhstan registered a budget deficit of $6.2 billion, or 3.7 p.c of GDP, on par with the deficit reported in 2020 on the top of COVID-19 pandemic. Whereas the financial system has expanded in recent times, efficiency has been lackluster in comparison with the heady development days of the early 2000s. As soon as a darling of international oil and fuel buyers, Kazakhstan has lengthy since did not get any main new initiatives off the bottom. Final 12 months, the long-awaited growth of the Tengiz oil area, the Tengiz Future Development Mission, was delayed once more, prompting the IMF to downgrade its forecast for Kazakh GDP development in 2024 from 4.2 to three.1 p.c.
In some ways, the failures of Tokayev’s administration to get the financial system shifting in recent times may be put all the way down to unfavorable political circumstances. The mud of the widespread protests that rocked Kazakhstan in January 2022 is just simply starting to settle, and Tokayev has been busy overseeing a lustration of kinds, pushing out loyalists of former President Nursultan Nazarbayev in favor of a brand new political and financial elite. Furthermore, Russia’s conflict in Ukraine has introduced a severe menace to Kazakhstan’s financial stability. Roughly 80 p.c of Kazakh crude exports go by way of Russian territory through the Caspian Pipeline Consortium (CPC) – which, already interrupted on doubtful political grounds in 2022, has its terminal simply west of Russia’s Novorossiysk port, unnervingly near Ukrainian forays towards Russian warships within the space in current months.
However, with the home political tensions that adopted the January 2022 protests largely subsiding and the understanding that the conflict between Russia and Ukraine is right here to remain, Tokayev seems to be refocusing his consideration on financial reform. Tokayev’s State of the Nation address in September final 12 months was devoted solely to financial coverage and laid out prudent measures to lower the state’s share within the financial system and enhance development. These included convincing banks to lend extra to the non-public sector, streamlining ministries, and maximizing Kazakhstan’s potential in promising sectors, akin to renewables.
All of those are broadly wise insurance policies; the proof can be within the pudding. Not one of the measures set out by Tokayev are new, and Kazakhstan has usually tried and did not implement them up to now. Kazakhstan’s failure to remain the course is commonly as a result of antagonistic short-term penalties that such reforms entail. Lifting subsidies will increase dwelling prices for the inhabitants, and decreasing the state’s share within the financial system pushes up unemployment – components that foster public dissatisfaction and immediate the federal government to backtrack on reforms. For instance, it was the state’s efforts to elevate value caps on LPG that offered the catalyst for the January 2022 protests within the first place – value controls that have been shortly reinstated because the unrest grew.
Because the quick fallout of the home and geopolitical turbulence of the final two years abates, the Tokayev administration is lastly in a position to transfer out of disaster administration mode and return to its financial agenda. Whereas the route of journey is optimistic, the actual problem can be seeing the reforms by way of. A decent socioeconomic local weather and threat of public protest might simply see the federal government backtrack and much-needed reforms fall by the wayside.
