Kazakhstan macro: Too-strong tenge still hindering budget revenue growth
On October 30, Kazakhstan’s Ministry of Finance published the budgetary statistics for 9M23, and the publication appeared later than usual. One cannot rule out that this delay was caused by internal discussions about the feasibility of the amended 2023 budget plan, as well as the 2024 budget. Tax collection (as well as total revenue collection, which includes some non-tax items) lagged well behind the plan—not least due to an excessively strong tenge. Even though the tenge depreciated from mid-summer levels, it was not enough to catch up with the revenue target—even amid a good economic performance. Robust tax revenue flow in the local budgets, which exceeded the 9M23 plan by 16.4% (and reached 79.4% of the annual target), while tax revenues of the republican budget lagged behind, clearly illustrates that. Note that local budget revenues don’t depend directly on the tenge and the oil price—as opposed to the republican budget and the National Fund.
The lack of revenue in the National Fund and the need for cash resulted in additional sales of FX from the fund. The fund sold $1.2 bln in September, much more than in previous months. This is a significant amount for the Kazakh FX market. Such sales prevented the tenge from weakening further. It looks as though sales remained significant in October as the tenge appreciated, albeit moderately. There is not much clarity about how the government can collect one-third of planned revenues in 4Q23. Most likely, it will be forced to sell more FX from its coffers. If so, then one cannot count on tenge weakness this year. The longer the tenge stays excessively strong, the more significant the depreciation that will be required to balance budgets in 2024—even though the expenditures will grow moderately.
Now read on...
Register to sample a report