A too slow tenge’s weakening still holds tax revenues at bay

KAZAKHSTAN - In Brief 25 Nov 2024 by Evgeny Gavrilenkov
As the tenge hovered close to USD/KZT 500 in recent days (but didn’t cross this level) tax revenue flow, associated with the oil price and the exchange rate, remained unimpressive in October. From the fundamental point of view the tenge should have been at these levels (and even a bit weaker) a year ago. These days it requires more weakening as the country’s inflation remains elevated. The Ministry of Finance reported that in 10M24, tax revenues of the republican budget amounted to 57.3% of the annual target. Total revenue collection looked better (74.8% of the annual target) due to inflated transfers from the National Fund and non-tax revenues (mainly dividends and other revenues of the state entities transferred to the republican budget). The former exceeded the annual target by 25.8%, the latter – by a factor of 2.6). In both cases these transactions were associated with massive government FX sales from reserves that prevented the tenge from further weakening. Thanks to these measures, in 10M24 the government was able to finance 77.0% of the republican budgetary expenditures (having delayed financing of over KZT0.8 trln). The republican budget deficit remained moderate as a result (KZT3.1 trln) but close to the yearly limit (KZT3.5 trln). Tax revenue flow to the National Fund also looked unimpressive (54.5% of the annual target in 10M24). We mentioned previously that the situation looked markedly different on the local level, as local budgetary revenues are not directly linked to the exchange rate. Moreover, they exceeded government expectations amid high inflation and the government recently decided to amend expenditures of the local budgets. As a result, about KZT...

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