Kazakhstan macro: Lacking tax revenue, the emphasis is on non-tax revenue
As the tenge recently hovered about USD/KZT 475, which was much better for the budget than USD/KZD 440s, it seemed insufficient to obtain more tax revenues. A year ago, we argued that a USD/KZT level above 500 would have been much more desirable for collecting additional tax revenues, as well as supporting economic growth. As inflation has remained elevated in the past twelve months, these days an even weaker tenge is required to accumulate tax revenues sufficient to finance the planned budgetary expenditures this year. The republican budget still lacks tax revenues. However, its deficit has remained relatively small as the government delayed spending.
Budgetary statistics show that a few months ago, the government already started to pressure state companies, which helped inflate non-tax revenues. The percentage of tax revenue in total revenues appears visibly lower this year, and we believe these trends will continue going forward. The government will continue placing more pressure on the companies it controls. Eventually, the government will be able to collect enough revenues. What is not good about such practices is that, by squeezing state-owned companies, the government reduces their ability to invest. By excessively penalizing various other businesses, the authorities may also reduce their investment plans. Therefore, it didn’t seem surprising that investments contracted in 1H24.
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