Kazakhstan keeps utilizing budgeted transfers well ahead of schedule implying that tax revenues were poor in April

KAZAKHSTAN - In Brief 10 May 2024 by Evgeny Gavrilenkov

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The Ministry of Finance reported that in 4M24, the National Fund grew from $63.7 bln as of January 1, 2024, to $64.9 bln as of May 1. In reality, it doesn’t mean that the authorities continued to build up international reserves, as in KZT terms, the fund shrank over the same period from KZT29.115 trln to KZT28.634 trln. Note that by May 1, the tenge appreciated by about 3.4%, i.e., to USD/KZT441.5 from about USD/KZT457 at the beginning of the year. Traditionally, one of the objectives of accumulating sovereign reserve funds is to prevent currencies from unnecessary appreciation. In Kazakhstan, this appreciation occurs amid a negative current account balance. As it follows from recent statistics, capital inflows only partially offset the current account deficit. It appears that the authorities cover the rest of the deficit by selling FX from the National Fund, and proceeds from these sales go directly to the budget as transfers. The Ministry of Finance reported that transfers from the National Fund to the republican budget amounted to KZT1.955 trln in 4M24. The budgeted amount for this year is equal to KZT4.070 trln, implying that in 4M24, the government already utilized one-half of the annual target. Even though the complete set of budgetary statistics for 4M24 will appear at the end of the month, recently published statistics on the cash flow of the National Fund show that the fund’s revenues reached KZT1.470 trln in 4M24 and were lower than transfers from the fund by about one-third. Hence, the depletion of the National Fund and related FX sales on the market and additional pressure on the tenge to appreciate. Recently, it appreciated to about USD/KZT 439, implying t...