The IMF staff issued a report on the conclusion of discussions in Kazakhstan under Article IV of the IMF’s articles of agreement.
The economy has recently declined sharply owing to challenges such as the lower oil price and the slowdown in Russia and China. Credit to the private sector has contracted significantly. Real GDP growth is expected to be 1.2% in 2015 and 2.2% in 2016, well below the potential of the economy.
A multi-year fiscal stimulus package is helping the economy to absorb the shocks but will lead to a wider fiscal deficit in 2015. The non-oil fiscal deficit of the general government is expected by the IMF to rise to 11% in 2015. In the short term fiscal policy supports economic growth but medium term fiscal consolidation is necessary to achieve a sustainable level of non-oil deficit.
The IMF report suggests that the Kazakhstan government needs to give urgent attention to formulating medium-term fiscal consolidation measures and these should particularly aim to raise more revenue. The report suggests that these measures could include strengthening the enforcement of tax collection, closing fiscal loopholes and reducing tax exemptions granted, including the exemptions available in the Special Economic Zones.
