Journal Issue
Share
Article

Kazakhstan

Author(s):
International Monetary Fund
Published Date:
September 1998
Share
  • ShareShare
Show Summary Details

I. Introduction and Overview

1. Since independence, Kazakhstan has made significant progress in transforming its economy into a market-based system.1 By 1997, macroeconomic stabilization had been largely achieved, its domestic market had become fairly liberalized and opened up to foreign competition, and the role of the state in the economy had been considerably reduced.

2. Kazakhstan has made substantial progress in macroeconomic stabilization in recent years (Box 1). Following a cumulative decline of 31 percent during 1992–95, real GDP began to recover in 1996, and the resumption of growth now seems to have been firmly established with growth rates of 2 percent being recorded in 1997 and in the first quarter of 1998. At the same time, inflation has fallen continuously since reaching a peak of more than 3,000 percent (annual rate) in mid-1994. By the end of 1997, the rate of price increase had fallen to about 11 percent and, by April 1998, the twelve-month change was in single digits for the first time since transition began. The external current account deficits have been fairly large in relation to GDP in recent years, due in particular to imports of capital goods needed to develop Kazakhstan’s vast natural resources. The financing of the deficits has, however, not posed major problems since Kazakhstan has benefitted from large foreign direct investment inflows, mainly into the oil and gas sectors.

3. In the area of structural reform, Kazakhstan has made significant progress especially in price and trade liberalization, in privatization, and in enterprise and banking sector restructuring.2 In addition to strengthening and deepening the reforms in these areas, the authorities’ reform agenda currently focusses in particular on pension reform, tax administration, expenditure policy, and public sector reform, with the main challenge being the implementation of the new pension system which was introduced on January 1, 1998 (Appendix I).

4. The authorities’ economic program for 1998 envisages a reduction in inflation to 9½ percent (end-period), a further pick-up in economic growth to 3 percent, and a widening in the external current account deficit to almost 6½ percent of GDP, due to the acceleration in economic activity and the decline in international oil prices. The medium-term outlook for the Kazakh economy depends crucially on the timing and the size of the revenues expected from the development of the energy sector. As analyzed in more detail in Appendix II, the outlook could span the entire range from serious imbalances to a situation characterized by “Dutch disease.”

Box 1.Basic Data

Social and demographic indicators (1997)
Area2,727,900 km2
Population15,672 thous.
Rate of population growth-4.9 percent
Life expectancy at birth (1996-97)67.5 years
Infant mortality rate (per 1,000 births) (1997)14.7
Hospital beds (per 10,000 inhabitants) (1996)100.3

Economic Indicators
(In percent of GDP unless otherwise indicated)
19931994199519961997
Real GDP (percent change)-9.2-12.6-8.20.52.0
Nominal GDP (in billions of US$)15.811.016.620.822.5
End-year inflation (percent change)2,169.11,160.360.428.611.3
External current account balance-2.8-8.6-3.1-3.6-4.2
Gross official reserves
(months of imports) 1/1.53.23.23.13.2
Government budget
Revenue 2/23.918.817.515.416.5
Expenditure 3/25.225.919.918.620.3
Balance 2/-1.3-7.2-2.5-3.1-3.8
Of which
Financing from the
banking system1.13.41.0-0.30.9
Velocity of broad money 4/3.513.010.612.510.8

Goods and nonfactor services.

Including privatization receipts.

Includes net surplus of extrabudgetary funds and quasifiscal operations for 1994-97.

Annualized quarterly GDP/end-period broad money (including foreign currency deposits).

Goods and nonfactor services.

Including privatization receipts.

Includes net surplus of extrabudgetary funds and quasifiscal operations for 1994-97.

Annualized quarterly GDP/end-period broad money (including foreign currency deposits).

II. Real Economy, Prices and Wages

5. Real GDP increased by 2 percent in 1997 following the recovery in output of 0.5 percent in 1996 and a cumulative decline of 31 percent during 1992–95. The largest contributors to growth in 1997 were the construction, trade and industrial sectors which grew by 10 percent, 5 percent, and 4 percent, respectively (Figure 1). Construction had initially lagged during the first half of the year, however, starting in June, activity picked up dramatically and, during the third quarter, exceeded output during comparable months in 1996 by over 60 percent before slowing down at the end of the year due to seasonal factors. The pick-up in construction could largely be attributed to the preparation of Akmola (now renamed Astana) as the national capital. Some industrial recovery occurred as investment in certain sectors, particularly foreign investment in the energy sector, continued to expand rapidly and the trade sector picked-up in line with the increasing reorientation of the economy away from large manufacturing towards the provision of services.

Figure 1.Kazakhstan: Output, 1992-97

(1992=100)

Sources: Kazakh authorities; and Fund staff estimates.

6. The relative shares of output of the various sectors of the economy have stabilized somewhat in 1997 following the reallocation of factors of production in the early years of transition in line with relative price signals provided by the new market economy. Industry and agriculture, which accounted for 27 and 29 percent, respectively, in 1991 now account for about 20 and 11 percent of total output, broadly similar to 1995–96. The category “other” which mainly includes services has, meanwhile, about doubled its share from 19 percent in 1991 to 37 percent in 1997.

7. Consumer price inflation continued to fall in 1997 to about 11 percent (end-period) compared to 28 ½ percent in 1996 and a peak of over 3,000 percent in mid-1994.3 The indices for food, clothing and footwear, medical care, and household goods remained subdued, the first due in some part to the improvement in agricultural output in 1997. Prices in transport and communication increased rapidly during the first half of the year; however, during the second half of the year only small increases were recorded. In line with the authorities’ policy of increasing the prices of communal services towards full cost recovery, significant adjustments to these prices occurred during the summer. As a result, the index for rent, water and power increased by about four times the rate of overall inflation. Prices for recreation, education and culture also increased significantly during the year as enterprises shed their social facilities and the costs of sanitoriums and child care services increased. The encouragement of the private provision of some educational services has also contributed to price increases in the service sector.

8. The wholesale price index increased by about 11½ percent during 1997. While the prices of metals, chemicals and other industrial inputs remained subdued, energy prices increased significantly. The index for electric energy rose by over 33½ percent due to price adjustments towards cost recovery. Prices for oil processing also rose significantly as an increasing number of enterprises engaged in this sector were privatized. Prices for the food industry, however, rose by only about 3 percent during the year reflecting the overall subdued nature of agricultural producer prices following the improvement in output.

9. Growth in the average nominal wage was about 20 percent, and in real terms almost 8 percent, during 1997. The pattern of divergence of wages across sectors continued in 1997 with those in the service sectors generally increasing at a higher rate. The development in dollar wages in Kazakhstan compared with neighboring countries is shown in Figure 2.

Figure 2.Kazakhstan: Consumer Price Inflation and Average Wages, 1993-97

Sources: National Statistic Agency; Ministry of Labor; and Fund staff estimates.

10. Officially measured employment continued to fall in 1997, recording a decline of over 16 percent. At the same time, the number of those unemployed, both officially and those considered as hidden unemployed, has decreased with the unemployment rate falling from 8.6 percent at end-1996 to 7.1 percent at end-1997.4 The simultaneous decrease in employment and in the unemployment rate can be attributed to two factors: net emigration and a shift in employment toward the informal sector and toward smaller firms and enterprises not accounted for in the employment surveys. The decline in population, estimated at almost 5 percent in 1997, is likely to have impacted the unemployment rate significantly, as emigration may well have been a more attractive option than to be unemployed.

11. During the first quarter of 1998, inflation continued to fall, declining to slightly more than 10 percent during the twelve months to March 1998.5 Real GDP increased by almost 2 percent in the first quarter compared to the same period in 1997, somewhat less than expected, partly because of difficulties in the agricultural sector.

III. Structural Reform

12. Substantial progress continued to be made during 1997 towards reducing the government’s role in economic production while better defining its regulatory, oversight and policy formulating functions. Privatization proceeded well and with regard to smaller enterprises was virtually completed. Progress in privatization of the largest state enterprises, which was substantial during the first half of the year, however, slowed down somewhat during the latter part of the year. In addition to pursuing reform through privatization, numerous other initiatives were taken to reform the transportation and communications, health and education, and agricultural sectors. Enterprise reform continued through restructuring and liquidation and the divestiture of their social assets. Legal reforms included the preparation of laws governing competition and defining the government’s regulatory roles in this regard.

A. Privatization and Enterprise Reform

13. The small scale privatization program was officially concluded in mid-1997 and focus shifted to the third stage privatization program. All sector-specific action plans under the latter program were finalized in early 1997 and began to be implemented with substantial progress made in the restructuring of the power and heat, railways, airlines and telecommunications sectors. The case-by-case privatization program, aimed at some of the largest formerly state-owned enterprises, proceeded well through the early part of 1997, although delays were subsequently encountered towards the end of the year. During 1997, a number of very large contracts were, nevertheless, signed with foreign firms, mainly in the non-renewable natural resources sector, covering the sale and management of enterprises and of oil and gas fields.

14. Under the small-scale privatization program, 2,736 enterprises were sold during 1997, accounting for 73 percent of the total offered for sale.6 A number of administrative difficulties that had earlier hampered the effective implementation of the program were resolved in early 1997. In conjunction with the removal of minimum prices at end-1996, this enabled the successful conclusion of the official program during the summer of 1997, although some residual small-scale enterprises continued to be offered for sale during the remainder of the year. The lengthy and complicated procedural and documental requirements that had earlier constrained the money auction program under the mass privatization scheme were also streamlined in 1997 and successful practices from the small-scale privatization program were applied. As a result, state-share packages in 1,297 companies were sold during the year under this program with special emphasis placed on the privatization of warehouses and agricultural facilities. As of early 1998, the mass privatization program had, however, not yet been concluded with money auctions of about 400 joint-stock companies continuing to be planned and implemented.

15. The case by case privatization program proceeded well early in 1997 before slowing down during the second half of the year. Among enterprises privatized in 1997, a 60 percent share of Mangistaumunaigaz, one of Kazakhstan’s largest oil companies, was sold to a foreign firm in March and Balkhashmys copper plant, one of the largest in the former Soviet Union, was privatized that month as was a large manganese plant. The national telecommunication company, Kazakhtelecom, was also privatized in 1997 with a foreign firm obtaining a 40 percent stake. Aktyubinskmunaigaz, a large oil producer, was privatized at mid-year with the sale of 60 percent of its stock. Late in the year, the government also concluded agreements to develop the Karachaganak gas field by private foreign firms and a foreign firm was awarded a 15-year concession to run the western and southern natural gas transport systems.

16. During 1997, the government issued specific criteria regarding the clearing of arrears, ecological liabilities and social assistance commitments with a view to enhancing the privatization efforts. The monitoring of management contracts was improved, a number of major companies formerly under such contracts were sold to the management companies and numerous existing contracts were modified or terminated because of failure by management companies to meet contractual terms. Under the third stage privatization program, the preparation, through external audit and prospectus issuance, of 13 firms previously excluded from privatization was also completed. Contrary to earlier expectations, however, the sale of these companies did not take place by end-1997. The sale of state share packages in some of these enterprises is expected to be made during 1998 under the “Blue Chip” program.

17. In the area of enterprise reform, the government strengthened the structure and operations of the former Enterprise Restructuring Agency (Agency on Reorganization and Liquidation of Enterprises). Uniform policies for monitoring enterprises and assisting them in preparing restructuring plans were adopted which enabled a speedier liquidation of a large number of majority state-owned enterprises or enterprises with large arrears toward the state. The divestiture of enterprise social assets proceeded well; 5,201 such facilities were offered to the Privatization Department to be put up for sale in 1997 and a significant portion of the 3,500 or so facilities that the Department accepted were successfully sold by early 1998.

B. Sectoral Issues

18. The government further reduced its role in the agricultural sector during 1997. The mandatory registration of export contracts at commodity exchanges which had already been removed for private farms at mid-year was eliminated altogether at the end of 1997. Procurement of grain by the state continued to be progressively reduced and was limited to under 200,000 tons in 1997. Steps were also taken to reform the financing of the agricultural sector. The government issued implementing resolutions for the Real Estate Registration Law in February and the development of rural credit societies was encouraged with steps taken towards conferring the branches of the former Agroprom Bank to such societies to help ensure the availability of rural banking services.

19. The reform of the petroleum and coal sectors focused on the privatization of viable enterprises and the closure of those that were unprofitable. Steps were taken to pursue oil enterprise restructuring and privatization via transparent procedures, wider public participation and attraction of strategic investors. During 1997, the government liquidated eight unprofitable coal mines in the Karaganda basin. The government is currently reassessing its strategy concerning privatization of the oil and gas sector.

20. Reform efforts in the transportation sector were geared towards cost-recovery and the elimination of preferential tariffs. With regard to urban transport, the authority to set tariff decisions was transferred to local governments as was the cost of maintaining preferential rates. Intercity railway passenger tariffs were increased by 20 percent and the government moved to start selling majority shares in airport and terminal service companies on a case-by-case basis. A strategy for the privatization of Kazakhstan Airlines was also prepared and submitted to the government for approval.

21. With regard to health and education, the government took steps to delineate responsibilities, streamline curricula and introduce user charges. Responsibilities between the Compulsory Medical Insurance Fund (CMIF) and the Ministry of Education, Culture and Health concerning the coverage and quality assurance of health services were clarified by means of a number of government resolutions. Effective from 1998, the charging of fees by polyclinics on a completed-visit basis prior to obtaining a refund from the CMIF was introduced. With regard to education, mechanisms were developed to allocate budgets on a capitated basis and plans were developed and implemented to reduce excessively specialized curricula in secondary schools. The government also increasingly encouraged the private provision of education and, as a result, the number of private facilities has grown from 18 schools in 1994–95 to 124 in 1997. In the area of social protection, the living standards assessment was completed with World Bank assistance and a thorough review of the benefits system is being initiated.

22. As regards financial sector reform, the authorities continued their efforts to improve the payments system, banking supervision and the soundness of the commercial banking sector. A settlement and depository system for corporate securities was established and the design of a large value transfer system was completed during the year. With regard to banking supervision, compliance with connected lending, large exposure, and minimum capital regulations improved significantly. During the year, the number of commercial banks was reduced from 101 to 82 as weak banks were liquidated and the number of bank branches was reduced by almost 40 percent to 582. The government has also taken steps to further reducing its participation in the commercial banking sector. In early 1998, the government conducted an audit of Exim Bank with the aim to sell as soon as possible the majority state share in the bank. Also, following the audit of Turan/Alem Bank in early 1998, the bank was privatized in April 1998.

23. Legal reforms pursued during 1997 included the preparation and submission to parliament of draft laws on unfair competition, natural monopolies and a new section of the civil code on the protection of consumer rights with the aim of better defining and strengthening the government’s regulatory role in the economy. Amendments were also made to the draft water code and a plan, consistent with the revised code, to adjust water charges and improve their collection was adopted.

24. As regards the implementation of the law on state support of direct investment, thirteen contracts had been signed by end-December 1997 amounting to US$58 million in investment and requiring an estimated US$11 million in tax concessions (cumulative over the period for which incentives are granted). Recently, World Bank experts have worked with the Investment Committee to develop policies for improving its procedures for providing tax and nontax incentives for investment, with a view to further enhancing transparency in the application of the law and to gradually shifting the emphasis from tax concessions to other forms of investment incentives.

IV. Monetary Developments

25. Money demand recovered sharply during 1997. Banking sector credit to the economy expanded at a much faster rate than inflation as did credit to government. The money multiplier exhibited substantial changes during the year as the composition of demand shifted away from cash foreign exchange towards domestic cash balances, leading to large increases in the net international reserves of the National Bank of Kazakhstan (NBK). Reflecting the steadily declining rate of inflation, market interest rates fell throughout the year, except at year-end when increased uncertainties in international capital markets contributed to increases in the treasury bill yield. The growth in money demand in 1997 reflected, in part, increased confidence stemming from the authorities’ vigorous steps to address the systemic weaknesses of the banking sector, as described above.

26. Monetary developments during 1997 can broadly be divided into two periods (Figure 3). During the first half of the year, the decline in confidence evidenced throughout 1996 was halted. Increases in the velocity of broad money, which had already moderated during the first quarter, had fully stopped by end-June. The authorities, however, maintained tight credit policies, particularly during the first quarter, and as a result, broad money increased by only about 6.5 percent during January-June with both currency in circulation and deposits increasing roughly at about the same rate. The increases in the net international reserves of the NBK during this period, associated with government receipts from privatization, did not have a monetary impact as the fiscal position remained strong and NBK credit to government declined substantially. In support of its tight credit policies, the NBK maintained its refinance rate at 35 percent through end-April despite a decline in the three-month treasury bill yield by a third from end-1996 to less than 22 percent at end-April 1997.

Figure 3.Kazakhstan: Monetary Indicators, 1994-98

Sources: Data provided by the NBK; and Fund staff estimates.

1/ Annualized quarterly GDP/end-period broad money.

2/ End-period broad money/end-period base money.

27. During the second half of the year, however, substantial declines in velocity occurred and the composition of money demand also changed with currency in circulation increasing much more than deposits. The stability of the Tenge, whose value against the U.S. dollar remained virtually unchanged in nominal terms from February onwards, increased confidence engendered by the upturn in economic activity, and decreased fears about the health of the banking sector, all contributed to an increase in deposits of almost 12 percent and an increase in currency in circulation of about 37 percent during July–December. The latter occurred in conjunction with reverse currency substitution for cash, and net international reserves of the NBK increased rapidly, bolstered further by receipts from the government of the proceeds of a Eurobond issuance in September/October. Initially, the NBK interpreted the increase in money as a reflection of higher demand and did little to sterilize the inflow of foreign exchange. However, it stepped up the sale of foreign exchange at year-end when there was some buildup of pressure in the foreign exchange market, associated with the turmoil in the financial markets in Asia and its impact on financial markets in Russia. The yield on three-month treasury bills, which had declined to under 13 percent by October, increased sharply at year-end, as the liquidity situation tightened with the sale of foreign exchange by the NBK (Figure 4).

Figure 4.Kazakhstan: Consumer Price Inflation and Interest Rate Developments, 1995-98

Sources: Kazakh authorities; and Fund staff estimates.

28. Credit to the economy from the banking system increased by almost 9 percent in real terms during 1997. Demand for credit by the private sector increased in line with the pick-up in economic activity. At the same time, commercial banks were also more willing to lend as the financial health of enterprises stopped deteriorating as indicated by reductions in inter-enterprise arrears. Credit to government increased sharply during 1997, exclusively from commercial banks reflecting their willingness to hold increasing amounts of treasury bills, while net credit from the NBK declined in nominal terms. Total credit to the government from the banking system remained low, however, amounting to less than one percent of GDP. NBK credit to commercial banks remained negligible throughout 1997, with gross credit decreasing by about 16 percent. With regard to interbank lending, activity in the organized interbank market had markedly declined during 1996 as banks became unwilling to lend to each other amidst increased uncertainties concerning the soundness of individual banks. This situation was reversed during 1997 as banks increasingly took recourse to direct bilateral trading.

29. Pressures in the foreign exchange market continued during January–February 1998, with the NBK selling substantial amounts of foreign exchange, while also letting the exchange rate for the Tenge depreciate somewhat from the beginning of the year. As a result, base money and broad money declined sharply during the first quarter of 1998. Yields on treasury bills and NBK notes rose further during the first quarter of 1998, particularly following the political uncertainties in Russia in connection with the dismissal of the government and the associated increase in Russian treasury bill yields. The NBK considered these developments to be temporary and therefore found no reason to adjust its refinance rate. Yields on treasury bills and NBK notes have fallen somewhat during April and May.

30. The financial system in Kazakhstan continued to deepen in 1997. The government introduced treasury bills with a maturity of two years and the trading volume continued to shift away from bills with maturities of three months to those with longer maturities. The NBK also introduced a new overnight facility for banks early in the year. The Kazakhstan Stock Exchange was split into the Almaty Financial Instruments Exchange and the new Kazakhstan Stock Exchange, with the first focusing on foreign currency trading and the latter on securities trading. The reserve requirement for commercial banks was reduced to 10 percent in two steps as compliance with prudential norms improved.

V. Public Finances

31. In recent years, the main fiscal problems in Kazakhstan have been: (i) a decline in revenues in relation to GDP, a result of the structural transformation of the economy which led to a shrinking of the state enterprise sector; and (ii) the accumulation of substantial expenditure arrears, especially on wages, utilities, and pensions. The authorities have responded to the revenue contraction and the arrears problem with a wide-ranging effort to reform fiscal institutions, strengthen tax and expenditure policy and management, and repaying arrears to suppliers, workers, and pensioners. These efforts were aided in 1996–97 by large privatization revenues and substantial foreign borrowing. An important issue is how to achieve sustainability in the public finances over the medium term when privatization receipts are expected to decline.7 The focus of fiscal efforts has now shifted toward: (i) achieving sustainable increases in non-privatization, non-oil public revenues; (ii) successfully implementing the new pension system based on individual accounts; (iii) reducing remaining non-pension arrears; and (iv) continuing the reform of government structures and institutions. These efforts resumed fully in early 1998 after a few problems in late 1997 due in part to the bureaucratic disruptions associated with the move of the capital from Almaty to Akmola (now Astana) in late 1997.

A. Fiscal Developments in 1997

32. The presentation of the official budget in Kazakhstan treats privatization proceeds as a revenue item. As discussed in Box 2, there are a number of arguments for treating privatization proceeds as a financing item in the presentation and analysis of the budget. Fiscal developments in Kazakhstan according to this presentation of the budget are shown in Box 2. Although the Fund now favors the presentation of the budget with privatization proceeds reated as a financing item, the discussion in the following sections of this chapter is based on the presentation used by the authorities, i.e., with privatization proceeds treated as a revenue item. The 1997 budget, approved by parliament in late-December 1996, projected revenues at 15½ percent of GDP, expenditure and net lending at 18¾ percent of GDP and a deficit of 3¼ percent of GDP. However, the 1997 budget did not include allocations for the repayment of arrears. When the government decided to clear all pension arrears (about 2 percent of GDP) as preparation for the introduction of the pension reform and to repay part of other expenditure arrears (about 1 percent of GDP) a revision of the budget was made at mid-year. Part of the additional costs of arrears clearance was covered by additional privatization proceeds and another part by expenditure cuts, while the remainder resulted in an increase in the budget deficit to 4¼ percent of GDP to be financed mainly through additional foreign borrowing.

Box 2.The Treatment of Privatization Proceeds in the Fiscal Accounts1

The short-run macroeconomic consequences of privatization are akin to those of a bond issue. Privatization should not reduce consumption because, unlike taxation, it does not reduce private sector wealth. In exceptional cases, it may reduce the propensity to invest. This may occur, for example, when the value of the privatized enterprise is lower in the hands of the public than the private sector. However, if the present value of the income stream generated by the assets to be privatized is the same in the public and private sectors, privatization entails an exchange of assets that does not affect the net worth of the government, or change that of the private sector. The impact on aggregate demand of spending the proceeds from privatization is thus likely to be expansionary. It will be even more so, if the value of the privatized enterprise is higher for the public than the private sector. Therefore, given the difficulty of predicting when the exceptional cases are relevant, and provided the stance of fiscal policy was appropriate to begin with, it would seem prudent to treat the proceeds from privatization as a financing item and not as revenue that may be spent without affecting the government’s intertemporal budget constraint.

The Annotated Outline for the revised GFS manual (IMF, 1996) advocates treating net lending for policy purposes as a financial transaction, since the government in carrying it out, exchanges one financial asset for another (a claim on the private sector). The Outline asserts that consistent treatment of privatization operations requires that they be treated as a financial operation as well.

Most privatization operations will take the form of a sale of shares, a financial asset. Equivalently, the government could sell the physical assets directly. The Outline does not take a position on whether or not the sale of physical assets should be part of revenue, but a parallel treatment would require that such a sale not be part of revenue.

In the table below, the general government budget for Kazakhstan is shown with privatization receipts treated as a financing item. Shown as a memorandum item is also the deficit with net lending treated as a (negative) financing item.

Kazakhstan: General Government Budget 1995–98
19951996199719982
(In percent of GDP)
Revenues and grants16.913.213.313.8
Expenditures and net lending20.818.620.321.5
O/w net lending2.01.21.41.7
Overall budget deficit excluding privatization receipts3.25.37.07.8
Financing2.74.76.87.8
Foreign2.02.62.63.8
Domestic0.0-0.11.01.8
Privatization receipts0.72.23.22.2
Memorandum item:
Overall budget deficit excluding privatization receipts and net lending1.24.15.66.1
1/ The contents of this box is largely based on PPAA/97/9, The Macroeconomic Impact of Privatization, prepared by G.A. Mackenzie.2/ Approved budget.

33. The budget incorporated a number of revenue-enhancing measures, including a new excise tax for crude oil and higher rates for the gasoline excise tax and for property, land, and vehicle taxes. In addition, the VAT legislation was amended to deny credit on VAT paid to other CIS countries, implying that Kazakhstan had moved closer to the generally accepted international principle of VAT taxation (destination principle) for CIS trade. Measures were also taken to fight smuggling of excisable goods, and amendments were passed to enforce collection of excise taxes on excisable goods in Kazakhstan, regardless of whether or not such taxes had been paid elsewhere in the CIS. Some revenues from users of natural resources, from bonuses and fixed rental charges, were projected to decline, although higher income tax receipts were expected from this sector. Overall, the revenue-enhancing measures were intended to raise tax revenues by about 2 percent of GDP, but this was to be partially offset by lower anticipated nontax revenues due to smaller projected NBK profits and the aforementioned expected reduction in bonuses and other natural resource revenues.

34. Revenue-sharing arrangements between the republican and local governments were also changed in 1997. The VAT and excises on crude oil and gasoline were allocated to the republican budget, and the republican budget shares of the corporate income tax and the personal income tax were set at 60 percent and 15 percent, respectively. The centralization of VAT collections at the republican level was expected to help improve administration, particularly ensuring prompt payment of VAT refunds to taxpayers.

35. The budget envisaged an increase in investment outlays and net lending in support of small- and medium-sized businesses, and higher outlays for enterprise restructuring. The government wage bill was projected to rise at the rate of inflation, but the ongoing reform of the government was expected to bring about reductions in the government workforce of about 20 percent on average, which would therefore enable average real budgetary wages to rise. Retrenched workers would receive two months pay at their last wage and were eligible for unemployment benefits. The average pension was planned to increase by 17 percent, broadly unchanged in real terms. The 1997 budget law “protected” some categories of expenditure (on wages, pensions and stipends) from sequestration. Thus, the expenditure cuts envisaged in the revised budget included investment and nonpriority expenditures, including purchases of materials and equipment, and capital repairs. The authorities also planned to improve budgetary control over local government operations during 1997.

36. The fiscal outcome for 1997 resulted in a deficit (cash basis from above the line data) of 3.8 percent of GDP, about ½ percent of GDP less than budgeted (Tables 25 and 26 and Box 3). About 70 percent of the deficit was financed from foreign sources, both via official lending by multilateral agencies and the issue of Kazakhstan’s second Eurobond in September 1997.

Box 3.Key Fiscal Indicators, 1995–98

19951996199719981
(In percent of GDP)
Total revenues and grants17.615.416.516.0
Of which
Tax revenue13.011.312.012.2
Privatization receipts0.72.23.22.2
Total expenditures and net lending20.818.620.321.5
Extrabudgetary funds (net) and quasi-fiscal operations0.60.00.00.0
Overall budget deficit2.53.13.85.5
Financing2.02.53.65.5
Of which
Domestic banking system1.0-0.10.90.9
Foreign2.02.62.63.8
Memorandum item:
Budget deficit excluding
privatization receipts3.25.37.07.8
1 Approved budget.

37. Revenues reached 16½ percent of GDP, including 1 percent of GDP in noncash receipts that reflected mutual offset operations at the local government level. Tax revenues rose by over ½ percent of GDP over the previous year to about 12 percent of GDP. Privatization receipts in relation to GDP reached 3.2 percent, compared with 1.8 percent in the budget and 2.2 percent in 1996, mostly on account of accelerated privatization in the energy sector. Despite the repayment of substantial amounts of wage arrears in the first half of the year, personal income tax receipts were marginally lower than projected. Corporate income taxes were also lower, reflecting mostly continued financial difficulties of state enterprises. Indirect taxes were as budgeted, with sustained efforts in tax administration leading to a slight overperformance in the VAT late in the year that offset earlier shortfalls. Those earlier difficulties were related to: (i) diminished incentives to collect the tax in some regions after the VAT was assigned to the republican budget; (ii) the double taxation of imports from CIS countries following the adoption of the destination principle in Kazakhstan which led to a reduction in trade with Russia; and (iii) the elimination (for the republican budget) of “mutual settlements” which allowed taxpayers to offset their tax arrears against debts owed to them by budgetary organizations. The improvements in VAT collections followed administrative measures (including replacement of regional heads of tax collection agencies) in the regions with the largest shortfalls. Collections of excises and natural resource taxes were lower than budgeted, reflecting lower output of some excisable commodities and natural resource extraction by domestic subsurface users, the continued practice of barter settlements, and interenterprise arrears.

38. Expenditure and net lending amounted to 20.3 percent of GDP and were, despite the repayment of pension and other expenditure arrears, about ½ percent of GDP below the budget ceiling. The government made progress in reducing non-pension arrears by end-1997 by first attacking the problem of local government wage and payroll tax arrears in the first half of 1997. While no additional allocations from the republican budget were made for this purpose, existing transfers to local governments (subventions) were earmarked for wage and payroll arrears repayment. Since local governments were unable to borrow, this measure forced them to rely on their own revenue-raising capacities to meet other local expenditures or to cut such expenditures.

B. Structural Fiscal Issues

39. Kazakhstan’s new tax code (introduced in 1995) is considered a model for transition economies, having minimized tax-induced distortions, eliminated favorable tax treatment of specific taxpayers, and generally made Kazakhstan’s tax laws consistent with established international practices. Simultaneously, the government has embarked on a wide-ranging and ongoing reform of tax collection systems and procedures. These efforts played a central role in revenue enhancement in 1997. The authorities are gradually implementing a specific set of measures during 1997–98 which includes the strengthening of criminal liability for taxpayer violations of tax legislation, the adoption of programs to detect unregistered taxpayers, to detect and control the largest stopfilers, and the tightening of procedures for granting tax deferrals. Although a large taxpayer unit has not yet been established, all large enterprises that have been privatized or are under management contracts are already subject to a special schedule of Tax Committee inspections. Tax arrears rose significantly during 1997, from the equivalent of 1.4 percent of GDP at end-1996 to 2.7 percent of GDP at end-1997. Arrears on the VAT and the corporate income tax more than doubled in nominal terms during 1997.

40. Institution building in the fiscal area also included the further development of the treasury system. At end-1997, the treasury absorbed the functions of the Budget Bank, which had been established on the basis of the cash clearing centers formerly managed by the NBK. The authorities have also incorporated most Akmola (Astana)-related expenditures into the 1998 budget. During 1997, the extrabudgetary fund established for this purpose, financed by loans and/or grants from individuals, corporations and friendly governments, had receipts of US$78 million and expenditures of US$94 million.

C. The 1998 Budget and Fiscal Developments January-March 1998

41. The 1998 budget envisages an increase in the deficit compared with the previous year mostly due to additional outlays related to pension reform, higher investment, and the inclusion in the budget of previously only partly funded social benefits. The budget deficit (including privatization proceeds as revenue) is to rise to about 5½ percent of GDP from about 4 percent of GDP in 1997 (Table 26).8 As shown in the table below, the 1998 budget deficit is about ½ percent of GDP lower compared with the 1997 outcome when the impact of the pension reform, additional public investment, and other special factors are taken into account.

Fiscal Adjustment, 1997–98
Change 1997 to 1998
(In percent of GDP)
1.Arrears clearance and transfer of partially funded social programs to the budget-1.0
2.Capital expenditures0.7
3.Interest payments0.5
4.Revenue decline, mainly due to pension reform (decrease+)1.8
5.=1+2+3+4 Change in deficit due to the above factors2.1
6.Change in overall budget deficit (increase +)1.7
7.=5-6 “Underlying fiscal adjustment”0.4

42. Planned sources of budget deficit financing include foreign borrowing amounting to approximately 3.8 percent of GDP, mostly from official multilateral sources for project financing, reform of public sector institutions, and pension reform (World Bank and Asian Development Bank), and another Eurobond placement planned for 1998. About half of the domestic financing is expected to come from the nonbanking system, including from the newly established State Pension Accumulation Fund and private pension accumulation funds. Starting in 1998, direct lending to the budget from the NBK is prohibited.

43. The budget projects revenues and grants conservatively at 15.5 percent of GDP, including tax revenues of 11.7 percent of GDP, and expenditure and net lending rising to 21.1 percent of GDP. On the revenue side, the authorities plan to continue to improve tax administration. On the tax policy side, the most important changes include: (i) the “stretching” of the brackets for the personal income tax and the lowering of marginal tax rates which is expected to expand the tax base by increasing compliance; (ii) the stopping of cash refunds for domestic taxpayers whose VAT on inputs exceeds VAT on sales (zero-rated exports will continue to receive cash refunds); (iii) the imposition of an excise tax on electricity and the elimination of tax preferences for specific groups that were entitled to duty free imports; (iv) the increase of some tax rates on land and property, and license fees; (v) the elimination of the “grandfathering” clause in the foreign investment law; and (vi) the collection of the equivalent of 0.3 percent of GDP in arrears on payroll contributions. The authorities also plan to sharply lower the system of mutual settlements for local budget operations. Privatization receipts are projected at 2.2 percent of GDP, with the sale of part of the state shareholding in a small number of “Blue Chip” companies alone expected to yield over half of the privatization revenues.

44. On the expenditure side, the budget provides the equivalent of 2.7 percent of GDP in budgetary transfers to the State Center for the Payment of Pensions (SCPP) for the payment of existing pensions, about 1 percent of GDP in additional investment expenditures related to the PIP, about 1.1 percent of GDP in allocations for survivor, disability, and social pensions (previously only partly funded), 0.9 percent of GDP for clearance of 50 percent of remaining non-pension general government arrears, and about 1 percent of GDP for expenditures related to the transfer of the capital to Astana (construction and improvement of infrastructure). A number of measures are planned to reform the size and structure of public expenditures. Specifically, it is planned to further reduce the size of public employment and reform the budgetary wage scale, improve the input mix in health and education by using less personnel and more materials, reduce the number of under-used facilities, and revise the system of intergovernmental fiscal relations. At the same time, the budget envisages a retrenchment of outlays on goods and services owing to the continuing downsizing and rationalization of government structures, and lower subsidies to state enterprises.

45. As regards the fiscal outcome for the first quarter of 1998, the deficit was much lower than expected. Revenues exceeded expectations while expenditures remained restrained and the general government budget registered a small surplus (Tables 25 and 26). Tax revenues were buoyed by a surge in VAT receipts following changes in legislation that effectively eliminated cash refunds for payers other than exporters. Strong corporate profit taxes were offset by weakness in personal income tax receipts that followed the reduction of top marginal tax rates at end-1997. On the expenditure side, lower-than-budgeted expenditures on general government services, public order, and defense were more than offset by higher-than-budgeted outlays for the payment of pensions necessitated by weak collections of payroll taxes that are related to the change to a funded pension system. Nonpension general government arrears also declined in the first quarter of 1998, although slightly less than envisaged in the budget.

D. Extrabudgetary Funds

46. Until its dissolution at end-1997 in connection with the comprehensive pension reform (see Appendix I), the Pension Fund was the largest extrabudgetary fund. Its own revenues from a 25.5 percent payroll contribution were expected to reach the equivalent of 5.1 percent of GDP in 1997, while current pension expenditure was projected at 5.6 percent of GDP.9 During 1997 the Pension Fund received budgetary transfers amounting to 2.2 percent of GDP to cover pension arrears and its current operating deficits. These pension arrears developed in 1995 and 1996 as a result of (i) the structural transformation of the economy, which led to a decline in the recorded wage bill in GDP, a low coverage rate of the working population, and a high system dependency ratio10; and (ii) the increases in pensions granted as part of the reforms enacted in mid-199611. There remain significant arrears in contributions to the Pension Fund (about 2-2 ½ percent of GDP at end-1997), mostly accumulated during 1995–96.

47. The share of payroll contributions allocated to the Social Insurance Fund (SIF), which funds temporary sickness and disability and certain other benefits, was lowered in 1996 from 15 percent to 5 percent of the payroll tax. SIF revenues and expenditures reached 0.3–0.4 percent of GDP. The Compulsory Medical Insurance Fund (CMIF) was established in 1996, funded by transfers from local budgets and 10 percent of the payroll tax. CMIF expenditures were projected to reach 1.2 percent of GDP in 1997, financed by own revenues (0.6 percent of GDP) and transfers of local budgets (0.6 percent of GDP). The CMIF budget for 1998 projects an increase in expenditures to 1.9 percent of GDP, financed by revenues from payroll taxes (including some contribution from arrears payment) amounting to 0.8 percent of GDP, and transfers from local budgets of 1.1 percent of GDP.

48. Payroll contributions are also being made to the Employment Fund (EF). The standard rate is 2 percent, and with the prospect of the restructuring of budgetary organizations and downsizing of government payrolls in 1997, starting in January 1997 budgetary organizations, which were previously exempt, were also required to contribute 1 percent of their payroll. Open unemployment remained low in Kazakhstan in 1997 and EF revenues and expenditures amounted to 0.3 percent of GDP. EF revenues and expenditures are budgeted to rise to about ½ percent of GDP in 1998.

49. The last extrabudgetary fund is the Road Fund (RF), which maintains road infrastructure and is financed by earmarked levies on petroleum products. Revenues and expenditures of the RF amounted to 0.6 percent of GDP in 1997. These are expected to remain unchanged (in relation to GDP) in 1998.

VI. External Sector

A. Balance of Payments

50. Despite buoyant exports, the current account deficit widened in 1997 to 4.2 percent of GDP from 3.6 percent in 1996 (Table 28). The deterioration resulted from increased imports of goods and particularly “other services,” reflecting increased foreign direct investment (FDI) inflows to hydrocarbon, ferrous metals, geological exploration, and communication sectors.

51. The trade balance deteriorated only slightly in 1997, recording a deficit of US$385 million as opposed to US$326 million in 1996. The dollar value of exports grew by 7.6 percent to US$6.8 billion, mainly as a result of increased exports of oil and gas condensate (14.8 percent) as well as other mineral products (notably coal, copper, iron, rolled ferrous metal, and zinc) (Table 29). While the exported value of other minerals increased owing to volume growth, exports of oil and gas condensate rose due to favorable price developments in the world market. In fact, the exported volume actually declined somewhat due to constrained transportation capacity. Kazakhstan’s annual access to Russian oil pipelines is limited to 10 million tons, which covered only two-thirds of the exported volume in 1997. This constraint was to some extent overcome at the cost of expensive road and rail transports, as well as by swapping oil with both Russia and Iran. Oil swaps with Iran remained, however, small as Iran suspended them in early 1997 due to a dispute over the quality of Kazakh oil.

52. The value of goods imports increased by 8.1 percent to US$7.2 billion (Table 30), reflecting both investments in the hydrocarbon sector and an increased demand for imported consumer goods. While the imports of investment goods increased by close to 30 percent, the imports of consumer goods (including shuttle imports, non-food consumer goods, and vehicles) increased by 50 percent. The imported volume of crude oil dropped by half to 1.7 billion tons, reflecting both increased domestic production and smaller recourse to oil swaps.

53. In 1997, the direction of external trade diverted away from BRO countries,12 which became second to the rest of the world as a recipient of Kazakh exports, and remained only marginally more important than the rest of the world as a source of Kazakh imports (Tables 31, 32, and 33). While BRO countries received 59 percent of Kazakh exports in 1996, they only received 46 percent in 1997. In particular, Kazakh exports diverted away from Russia and towards Western Europe, notably the United Kingdom and Germany. The BRO countries’ share of Kazakh imports dropped from 71 percent in 1996 to 55 percent in 1997 as imports from Russia were substituted for by imports from Germany, the United States and the United Kingdom.

54. The balance of services and current transfers deteriorated as imports of “other nonfactor services”—notably geological exploration, communication services, and government services—grew significantly. Dampening this impact, exports of transportation services (mainly freight) as well as receipts of unrequited transfers (mainly humanitarian aid) increased.

55. The surplus in the capital account originated from continuously high FDI inflows as well as inflows of trade credits, multilateral credits, and receipts of the Eurobond issue in September. Lowering the surplus, capital transfers out of Kazakhstan doubled in 1997 following increased emigration of ethnic Russians. Net FDI inflows amounted to US$1.3 billion, up from US$1.1 billion in 1996. The United States lost its position in 1997 as the main source of FDI inflows to South Korea, which now accounts for 35 percent, and China (15 percent) (Table 34). Almost three-quarters of Kazakhstan’s FDI receipts go to the hydrocarbon and ferrous metals sectors; however, geological exploration, energy, and communication sectors expanded their shares significantly in 1997 (Table 35). Drawings on trade credits and credits from multilateral agencies, notably the IBRD and the Asian Development Bank, exceeded US$300 million each, while outflows arising from servicing external debt, measured as a ratio to exports of goods and nonfactor services, remained sustainable at just below 6 percent.

56. The stock of external debt relative to GDP increased somewhat in 1997, but remained comfortably just above 20 percent (Table 36). The single most important factor behind the increase in the external debt stock was the sovereign Eurobond issue at end-September amounting to US$350 million. This five-year bond, which was issued to finance the clearance of remaining pension arrears, had a primary market yield spread over a comparable U.S. treasury bill of 245 basis points. By way of comparison, the US$200 million three-year Eurobond which was issued at end-1996 carried a 350 basis point spread.

57. In the secondary market, the repercussions of the Asian financial turmoil for the yield spreads on the two sovereign Kazakh bonds were significant but fairly short-lived. The secondary market yield spread on the 1996 issue jumped from 200 basis points to 400 basis points in the course of a few days in late October, and continued climbing to a high of nearly 600 basis points, which was reached in early January 1998. From there the spread declined steadily back to slightly above 200 basis points by early April, which is much lower than for many other CIS countries. The secondary market yield spread on the 1997 issue fluctuated from 600 basis points right after the issuance in October to 250 basis points in late November, just to climb back to 600 basis points in early December where it stayed until mid-January 1998 before the decline started. By end-April, the spread had stabilized at around 300 basis points.

58. Kazakhstan’s sovereign credit rating remained unchanged by Moody’s (Ba3) and S&P (BB-). No progress was made in settling disputed debt between Kazakhstan and some other BRO countries, notably Russia.

59. To sum up, Kazakhstan’s external position remained comfortable in 1997. The overall balance of payments surplus of US$490 million was accounted for by buoyant oil exports and foreign direct investment, as well as a successful sovereign Eurobond issue. The external surplus increased gross official international reserves to cover 3.2 months of imports of goods and nonfactor services.

60. In the first quarter of 1998, the current account recorded a small deficit (US$50 million). The value of exports was subdued due to the collapse of world market oil prices. The current account deficit was offset by an equal inflow of foreign capital; however, large unidentified balance of payments outflows—reflecting mainly hoarding of foreign currency cash balances in January—brought the overall balance into a deficit of US$260 million.

B. Exchange Rate and Competitiveness

61. Although the Kazakh Tenge appreciated in real terms in 1997 (Figure 5), the competitiveness of Kazakh exports remained adequate (see Appendix II for more details). The Tenge remained remarkably stable against the U.S. dollar in nominal terms throughout 1997, while depreciating marginally against the Russian ruble. This implied an appreciation of the Tenge’s real effective exchange rate of around 5 percent. Despite the real appreciation, both oil and nonoil exports continued to grow in both volume and value terms. In particular, the growth of nonoil exports associated with their diversion away from BRO countries suggests that the external price competitiveness of Kazakh exports has not been excessively eroded by the real appreciation.

Figure 5.Kazakhstan: Weighted Real Exchange Rate, 1994-98 1/2/

(December 1994=1)

Sources: Data provided by the NBK; and Fund staff estimates.

1/ Estimated as an equally weighted average of the real exchange rate of the tenge versus the dollar and the ruble.

2/ An increase in the index is a real appreciation.

C. Exchange and Trade System

62. The legal basis for the foreign exchange system was substantially amended in 1997. The National Bank of Kazakhstan issued five new regulations concerning the conduct of and reporting on foreign exchange operations. While these regulations ensure the convertibility of the Tenge for current account transactions, legal entities’ capital account transactions remain subject to a license from the NBK.

63. The external trade system continued to be liberalized, although new import licensing requirements were introduced for alcohol (including denaturalized alcohol). The adoption of a new tariff structure in early 1997 implied a reduction in the weighted average import tariff rate to 10 percent, thus bringing the cumulative reduction since end-1995 to almost 18 percent. Moreover, the compulsory registration of export contracts entered by state farms was abolished at end-1997.

STATISTICAL APPENDIX
Table 1.Kazakhstan: Value Added in the Main Production Sectors, 1993-98
199319941995199619971998
QI
(In millions of Tenge)
Nominal GDP
Industry8,444123,277238,733299,958347,43096,385
Agriculture4,83763,298125,134170,223184,75812,179
Construction2,44040,59965,50162,30170,2449,278
Transport and communication2,93747,283108,203159,704178,95139,845
Trade and catering3,05151,396174,642244,916288,71771,392
Others 1/7,71497,616301,977478,648631,646168,369
Total29,423423,4691,014,1901,415,7501,701,747397,448
(Percent change from previous year)
Real GDP growth
Industry-14.0-27.5-8.60.34.03.8
Agriculture-6.9-21.0-24.4-5.01.9-13.0
Construction-25.9-16.2-37.6-21.810.014.6
Transport and communication-14.4-26.3-12.51.52.01.9
Trade and catering-13.1-17.46.114.75.01.4
Others 2/0.514.31.3-0.8-0.41.7
Total-9.2-12.6-8.20.52.01.9
(In percent of GDP)
Share of GDP
Industry28.729.123.521.220.424.3
Agriculture16.414.912.312.010.93.1
Construction8.39.66.54.44.12.3
Transport and communication10.011.210.711.310.510.0
Trade and catering10.412.117.217.317.018.0
Others 1/26.223.129.833.837.142.4
Total100.0100.0100.0100.0100.0100.0
Sources: National Statistical Agency, and Fund staff estimates.

Mainly services.

Sources: National Statistical Agency, and Fund staff estimates.

Mainly services.

Table 2.Kazakhstan: Industrial Production, 1993-97
19931994199519961997
(In millions of Tenge)
Gross output
Electric power engineering3,64764,834104,157109,523115,144
Fuel industry3,97679,080162,191192,603222,777
Ferrous metallurgy2,66542,84295,19077,212102,054
Nonferrous metallurgy3,39941,12576,28888,080119,208
Chemistry and petrochemistry1,02212,76330,78531,08417,667
Machine building2,58125,17448,55752,56242,399
Timber and wood processing6053,8096,0676,3185,970
Construction materials1,31814,04424,69721,14319,157
Light industry1,50914,23015,87618,37018,150
Food industry2,96435,57573,804109,129148,864
Others1,86520,57628,00628,88058,172
Total25,549354,051665,618734,904869,562
(Percent change from previous year)
Real output growth
Electric power engineering-4.4-15.2-12.3-10.3-14.7
Fuel industry-14.8-14.0-3.22.2-1.9
Ferrous metallurgy-24.4-29.513.5-17.524.0
Nonferrous metallurgy-7.8-22.86.33.615.2
Chemistry and petrochemistry-44.6-41.11.6-27.2-34.3
Machine building-12.7-38.6-27.3-9.2-29.8
Timber and wood processing-9.4-37.1-40.08.8-21.3
Construction materials-26.8-44.9-29.0-33.8-20.2
Light industry-9.4-57.1-59.318.55.3
Food industry-12.3-26.1-37.532.828.0
Total-14.0-27.5-8.60.34.0
(In percent of total)
Share of gross output
Electric power engineering14.318.315.614.913.2
Fuel industry15.622.324.426.225.6
Ferrous metallurgy10.412.114.310.511.7
Nonferrous metallurgy13.311.611.512.013.7
Chemistry and petrochemistry4.03.64.64.22.0
Machine building10.17.17.37.24.9
Timber and wood processing2.41.10.90.90.7
Construction materials5.24.03.72.92.2
Light industry5.94.02.42.52.1
Food industry11.610.011.114.817.1
Others7.35.84.23.96.7
Total100.0100.0100.0100.0100.0
Sources: National Statistical Agency; and Fund staff estimates.
Sources: National Statistical Agency; and Fund staff estimates.
Table 3.Kazakhstan: Production of Selected Industrial Goods, 1993-97
19931994199519961997
Production
Crude oil (in thousands of metric tons) 1/22,97520,27920,64122,96025,776
Coal (in thousands of metric tons)111,880104,62583,35576,83172,586
Natural gas (in millions of cubic meters) 2/6,6854,4885,9166,5248,115
Iron ore (in thousands of metric tons)13,12910,52114,90212,97512,966
Electricity (in millions of kwh)77,44466,39766,65959,03851,984
Mineral fertilizers (in thousands of tons)304126197191151
Textiles
Cotton yarn (in thousands of tons)3520432
Woven cotton fabrics (in millions of square meters)13685212114
Paper (in metric tons)2,10872117467154
Tires (in thousands)1,784264831071
Building materials (in thousands of tons)3,9632,0331,7721,115661
Cast iron (in thousands of tons)3,5522,4352,5302,5363,089
Processed meat (in thousands of tons)609412273173120
Milk products (in thousands of tons)755552279250198
(Percent change from previous year)
Growth of production
Crude oil (in thousands of metric tons) 1/-11.1-11.71.811.212.3
Coal (in thousands of metric tons)-11.6-6.5-20.3-7.8-5.5
Natural gas (in millions of cubic meters) 2/-17.6-32.931.810.324.4
Iron ore (in thousands of metric tons)-25.7-19.941.6-12.9-0.1
Electricity (in millions of kwh)-6.4-14.30.4-11.4-11.9
Mineral fertilizers (in thousands of tons)-65.5-58.555.8-3.0-20.8
Textiles
Cotton yarn (in thousands of tons)-9.3-43.4-79.0-24.8-27.9
Woven cotton fabrics (in millions of square meters)0.3-37.6-74.9-1.4-33.0
Paper (in metric tons)201.1-65.8-75.9-61.5129.9
Tires (in thousands)-38.1-85.2-68.629.4-99.5
Building materials (in thousands of tons)-38.4-48.7-12.8-37.1-40.7
Cast iron (in thousands of tons)-23.9-31.43.80.221.8
Processed meat (in thousands of tons)-3.8-32.3-33.8-36.7-30.3
Milk products (in thousands of tons)-29.7-26.9-49.5-10.5-20.6
Sources: National Statistical Agency; and Fund staff estimates.

Includes gas condensates.

Consists of both gas from oil wells (gas-oil) and gas from gas wells.

Sources: National Statistical Agency; and Fund staff estimates.

Includes gas condensates.

Consists of both gas from oil wells (gas-oil) and gas from gas wells.

Table 4.Kazakhstan: Production of Selected Agricultural Goods, 1993-97
19931994199519961997
(In thousands of metric tons; unless otherwise indicated)
Production
Meat2,2312,1021,7741,5101,302
Milk5,5775,2964,6193,6273,220
Eggs (in millions)3,2882,6291,8411,2631,242
Wool9675584232
Cereals21,63116,4549,50611,23712,238
Of which
Wheat11,5869,0526,4907,6788,955
Rice403283184226255
Barley7,1495,4972,2082,6962,583
Oats802822250359286
Soybean66433
Potatoes2,2962,0401,7201,6571,472
Tobacco43222
Vegetables808781780778880
(Percent change from previous year)
Growth of production
Meat77.4-5.8-15.6-21.6-14.0
Milk5.9-5.0-12.8-22.5-11.0
Eggs-7.8-20.0-30.0-30.7-2.0
Wool2.9-21.6-22.6-29.8-23.0
Cereals-27.3-23.9-42.218.28.9
Of which
Wheat-36.6-21.9-28.318.316.6
Rice-13.7-29.9-35.123.312.8
Barley-16.0-23.1-59.822.1-4.2
Oats10.22.5-69.643.6-20.3
Soybean-50.8-5.2-32.7-18.90.0
Potatoes-10.6-11.2-15.7-3.7-11.2
Tobacco10.8-31.7-39.30.00.0
Vegetables-36.5-3.3-0.2-0.213.1
(In percent of total production)
Share produced by private farms
Meat49.061.064.666.475.4
Milk58.064.071.177.986.7
Eggs38.642.039.646.476.2
Wool35.046.051.557.572.2
Potatoes74.079.086.088.098.8
Vegetables61.064.070.077.098.8
Sources: National Statistical Agency; and Fund staff estimates.
Sources: National Statistical Agency; and Fund staff estimates.
Table 5.Kazakhstan: Livestock Population, 1993-97
19931994199519961997
(Thousand heads; end-of-period)
Animal population
Cattle9,4008,5507,2325,4254,299
Of which
Cows3,6223,5253,1492,5472,098
Sheep and goats37,66029,75923,06213,67910,410
Pigs2,5332,1471,6321,036884
Horses1,7421,6491,5211,3101,081
Poultry52,30845,12126,48115,37815,296
(Percent change from previous year)
Growth of animal population
Cattle-9.0-15.4-14.8-21.0
Of which
Cows-2.7-10.7-11.3-18.0
Sheep and goats-21.0-22.5-25.5-24.0
Pigs-15.2-24.0-22.0-15.0
Horses-5.4-7.7-6.1-18.0
Poultry-13.7-41.3-35.4-0.5
Sources: National Statistical Agency; and Fund staff estimates.
Sources: National Statistical Agency; and Fund staff estimates.
Table 6.Kazakhstan: Consumer Prices, 1994-98
Jan.Feb.Mar.Apr.MayJun.Jul.Aug.Sep.Oct.Nov.Dec.
(In monthly percent change)
1994
Total42.624.217.431.833.845.925.413.39.720.114.210.2
Food52.226.016.729.229.649.818.47.34.323.113.810.8
Bread and cereals19.122.419.615.920.433.354.520.511.4164.314.39.4
Meat and poultry97.828.412.925.128.730.527.213.05.57.97.34.9
Fish38.626.227.824.626.531.725.614.39.710.48.29.5
Dairy products159.240.010.538.921.449.120.96.53.317.525.023.8
Eggs177.544.921.833.813.17.116.217.06.516.554.823.6
Oils and fats89.439.919.424.729.835.79.46.89.513.917.224.5
Fruits and vegetables33.330.322.439.845.967.5-4.1-14.9-12.7-1.919.713.8
Sugar, coffee, tea and condiments34.818.219.219.633.062.522.014.07.810.710.18.1
Beverages at home15.07.313.518.029.787.617.06.17.38.37.25.1
Food and beverages away from home43.435.219.557.328.345.726.714.98.415.59.08.1
Tobacco18.010.06.314.320.023.916.112.16.26.13.32.2
Clothing and footwear27.018.316.525.332.642.028.624.118.718.216.19.0
Rent, water, and power27.515.810.6102.7118.938.759.415.918.418.930.012.9
Household goods24.019.516.125.428.949.333.023.811.411.28.57.2
Medical care29.053.652.835.540.834.742.522.427.219.012.910.3
Transportation and communication21.321.010.894.456.630.747.816.510.618.47.510.6
Recreation, education and culture50.633.530.029.729.739.938.223.415.514.410.910.1
Personal care36.523.526.524.029.437.425.015.514.916.210.65.6
1995
Total8.96.75.13.22.72.32.92.12.44.14.43.6
Food9.47.84.23.43.11.61.41.21.73.65.44.8
Bread and cereals8.99.92.42.82.13.04.12.24.96.37.15.1
Meat and poultry9.78.16.26.87.85.62.92.61.71.71.22.1
Fish13.96.72.62.11.81.81.44.21.11.93.32.4
Dairy products16.911.69.22.31.6-1.13.20.01.03.012.26.0
Eggs11.01.3-2.6-4.2-2.3-4.30.50.61.78.722.618.1
Oils and fats22.913.75.20.2-1.4-2.2-0.81.25.15.22.53.7
Fruits and vegetables15.112.26.23.52.2-1.8-11.1-11.4-10.15.011.116.2
Sugar, coffee, tea and condiments7.78.43.41.60.90.74.43.41.50.00.00.5
Beverages at home2.32.20.21.51.50.82.24.72.43.14.01.4
Food and beverages away from home9.47.96.67.36.15.03.05.03.22.93.62.6
Tobacco0.71.34.25.43.43.23.52.94.63.02.72.2
Clothing and footwear6.94.23.52.11.71.31.32.02.01.81.31.2
Rent, water, and power29.95.840.22.84.87.012.25.76.510.85.54.2
Household goods5.74.33.32.41.91.41.61.51.82.21.51.8
Medical care6.59.44.23.13.31.81.42.32.01.51.71.2
Transportation and communication10.07.58.95.42.15.910.34.42.27.16.01.0
Recreation, education and culture8.57.53.95.12.83.43.33.64.92.52.02.2
Personal care4.16.83.43.72.71.91.52.11.11.00.91.5
1996
Total4.12.51.73.02.02.51.80.71.22.92.40.8
Food5.83.11.92.32.10.8-1.0-1.4-0.5-0.11.31.1
Bread and cereals3.32.21.63.62.41.41.92.02.30.80.4-0.4
Meat and poultry6.54.23.04.49.22.60.20.0-0.5-0.1-1.3-0.4
Fish2.14.11.61.6-0.40.00.20.40.90.20.20.6
Dairy products6.84.7-0.10.1-1.2-2.1-1.2-0.90.92.95.85.5
Eggs20.4-1.0-1.41.5.5.3-5.4-5.5-1.00.41.15.13.9
Oils and fats1.80.0-0.5-0.6-1.1-1.4-2.5-1.60.60.12.62.2
Fruits and vegetables20.210.07.84.42.92.0-10.3-17.5-14.2-7.69.510.0
Sugar, coffee, tea and condiments0.60.2-0.3-0.1-0.9-0.8-1.1-0.6-0.4-0.9-0.20.0
Beverages at home1.70.80.70.60.70.40.50.50.00.50.30.6
Food and beverages away from home2.54.21.82.01.44.12.71.61.91.50.01.0
Tobacco1.41.70.70.21.20.20.40.10.50.40.50.6
Clothing and footwear0.91.01.00.80.50.30.40.40.80.90.60.3
Rent, water, and power1.22.12.119.05.222.117.28.37.821.811.10.6
Household goods1.11.10.81.00.30.20.10.20.20.40.20.3
Medical care1.03.00.90.21.31.00.61.41.0-0.10.30.1
Transportation and communication6.12.41.41.13.61.21.61.21.03.91.11.5
Recreation, education and culture2.42.62.62.20.63.92.96.34.44.03.21.9
Personal care0.80.71.21.10.60.50.50.50.52.71.30.8
1997
Total2.11.70.80.80.40.80.7-0.3-0.11.11.51.3
Food2.21.70.8-0.1-0.40.0-0.3-1.2-0.40.21.31.9
Bread and cereals-0.40.2-0.2-0.3-0.4-0.1-0.7-0.2-0.1-0.3-0.5-0.4
Meat and poultry0.91.20.92.72.60.50.50.20.50.10.01.5
Fish1.31.50.20.1-0.9-2.2-0.60.20.50.12.01.4
Dairy products3.42.31.2-2.8-4.3-4.5-0.60.51.13.86.46.2
Eggs8.20.9-1.2-4.0-6.7-7.4-2.8-2.42.54.55.04.1
Oils and fats2.02.31.80.5-0.8-1.9-1.00.12.62.41.31.4
Fruits and Vegetables15.18.02.7-2.6-3.1-4.5-10.5-13.1-6.7-0.412.012.4
Sugar, coffee, tea and condiments0.61.41.20.90.68.96.6-1.4-2.6-2.2-1.30.5
Beverages at home0.10.50.50.10.4-0.40.50.70.30.11.31.1
Food and beverages away from home2.00.82.60.90.30.40.50.60.00.40.41.4
Tobacco1.20.30.40.80.50.70.80.60.80.61.20.8
Clothing and footwear0.50.30.30.20.20.10.00.00.20.30.50.4
Rent, water, and power2.93.01.37.31.85.15.32.30.14.93.90.5
Household goods0.30.10.10.30.20.10.00.10.10.20.00.1
Medical care0.3-0.20.9-1.11.60.5-0.2-0.90.10.1-0.20.1
Transportation and communication6.42.5-0.63.51.00.81.00.10.22.11.00.9
Recreation, education and culture1.14.02.71.33.30.51.20.50.40.40.20.7
Personal care1.02.10.60.40.9-0.4-0.10.10.00.40.00.0
(Percentage change over previous year)
Memorandum items:
Total 19942,330.32,192.21,921.82,095.32,430.33,029.53,121.52,728.32,304.51,990.11,434.71,158.3
Total 1995860.9725.6639.2479.1344.6211.9156.1130.6115.286.470.560.3
Total 199653.347.342.542.241.241.439.937.936.534.932.428.7
Total 199726.225.224.121.519.517.616.415.313.711.710.611.2
Total 199811.010.310.29.99.8
Sources: National Statistical Agency; and Fund staff estimates.
Sources: National Statistical Agency; and Fund staff estimates.
Table 7.Kazakhstan: Administered Prices, 1994-97 1/
Jan.Feb.Mar.Apr.MayJun.Jul.Aug.Sep.Oct.Nov.Dec.
1994(Administratively set price for the corresponding month, in Tenge)
Wholesale prices
Oil 2/ (ton)100.0100.0100.0633.0
Coal 2/ (ton)81.081.081.079.0146.0
Natural gas (1000m3)5.021.034.088.0124.0139.0150.0250.0253.0291.0291.0291.0
Gasoline 3/ (ton)654.0678.0695.01,573.01,698.02,080.04,442.04,442.05,153.05,579.0
Diesel fuel 3/ (ton)706.0728.0757.01,339.01,463.02,087.04,119.04,119.04,401.04,401.0
Fuel oil 3/ (ton)452.0448.0471.0775.0823.0900.02,121.02,121.02,266.02,266.0
Electricity (kwh)0.10.10.10.40.40.71.11.11.21.21.21.3
Retail prices
White bread 3/0.50.50.50.50.50.51.31.31.3
Gasoline A93 3/ (per liter)1.21.21.21.83.73.77.47.47.4
Gasoline A76 3/ (per liter)1.21.21.21.73.43.46.76.76.7
Diesel fuel 3/ (tons)1.11.11.11.73.13.16.46.46.4
Fuel 3/ (tons)0.10.10.10.20.40.40.80.80.8
Electricity in rural areas (kwh)------0.20.20.90.90.91.41.41.41.4
Eleotricity in urban areas (kwh)0.00.00.00.30.30.30.91.01.01.51.51.5
Electrical heating------0.20.20.90.90.91.41.41.41.4
Water and sewage0.20.30.30.50.60.61.11.86.57.59.110.3
Hot water0.30.30.30.42.94.14.45.35.67.013.315.4
Rent (per square meter)0.10.10.10.30.30.50.60.90.91.01.21.3
Transportation (public) 4/0.10.10.10.50.71.11.61.91.92.32.42.6
Telephone subscription4.44.44.413.013.026.540.040.060.060.060.060.0
1995
Wholesale prices
Oil 2/
Coal 2/
Natural gas291.0291.0291.0343.0349.0349.0404.0414.0415.0415.0454.0454.0
Gasoline 3/
Diesel fuel 3/
Fuel oil 3/
Electricity1.31.31.31.31.31.31.41.41.41.41.41.5
Retail prices
White bread 3/
Gasoline A93 3/
Gasoline A76 3/
Diesel fuel 3/
Fuel 3/
Electricity in rural areas1.41.41.41.41.41.41.41.41.4n.a.n.a.n.a.
Electricity in urban areas1.51.51.51.51.51.51.51.51.52.02.02.0
Electrical heating1.41.41.41.41.41.41.41.41.4n.a.n.a.n.a.
Water and sewage10.511.211.911.912.112.612.913.214.515.316.816.9
Hot water20.222.622.222.529.030.933.234.838.644.547.349.7
Rent1.41.61.81.91.92.02.12.32.62.82.93.0
Transportation (public) 4/3.64.54.75.05.15.76.16.76.98.08.89.1
Telephone subscription60.060.060.060.060.060.0120.0120.0120.0120.0120.0120.0
1996
Wholesale prices
Oil 2/
Coal 2/
Natural gas547.0551.0551.0551.0551.0551.0551.0549.0549.0549.0529.0546.0
Gasoline 3/
Diesel fuel 3/
Fuel oil 3/
Electricity1.61.61.61.61.61.81.92.02.02.22.22.2
Retail prices
White bread 3/
Gasoline A93 3/
Gasoline A76 3/
Diesel fuel 3/
Fuel 3/
Electricity in rural areasn.a.n.a.n.a.
Electrioity in urban areas2.02.02.02.02.02.02.02.02.02.12.12.2
Electrical heatingn.a.n.a.n.a.
Water and sewage18.018.919.222.724.929.743.749.656.372.281.581.6
Hot water49.853.854.164.366.8100.4139.3150.8158.9198.5200.6208.4
Rent3.03.33.33.53.83.94.64.84.24.64.74.9
Transportation (public) 4/9.510.09.910.110.110.410.410.410.510.510.610.8
Telephone subscription150.0150.0150.0150.0150.0150.0165.0165.0165.0200.0200.0200.0
1997
Wholesale prices
Oil 2/
Coal 2/
Natural gas547.0547.0548.0548.0563.0563.0563.0563.0563.0563.0594.0594.0
Gasoline 3/
Diesel fuel 3/
Fuel oil 3/4,292.04,315.04,295.03,639.03,393.03,367.03,284.03,282.03,448.03,709.03,704.03,823.0
Electricity2,589.02,664.02,726.02,726.02,738.02,740.02,988.02,999.03,021.02,999.02,970.03,093.0
Sources: National Statistical Agency, and Fund staff estimates.

Rents, utility fees (heating, water), and local transportation fares are set administratively at the regional (oblast) level. All other prices are set at the national level.

Prices were liberalized in the second quarter of 1994.

Prices were liberalized in the fourth quarter of 1994.

Prices were liberalized in August of 1994.

Sources: National Statistical Agency, and Fund staff estimates.

Rents, utility fees (heating, water), and local transportation fares are set administratively at the regional (oblast) level. All other prices are set at the national level.

Prices were liberalized in the second quarter of 1994.

Prices were liberalized in the fourth quarter of 1994.

Prices were liberalized in August of 1994.

Table 8.Kazakhstan: Wholesale Prices, 1994-98
Jan.Feb.Mar.Apr.MayJun.Jul.Aug.Sep.Oct.Nov.Dec.
(In monthly percent change)
1994
Total44.934.929.582.837.245.735.813.216.813.13.04.5
Electric energy7.82.30.5208.412.5102.182.02.85.631.81.7-0.1
Fuel95.57.25.8106.948.927.376.94.83.318.90.0-2.6
Oil extraction0.46.20.0436.525.718.786.30.30.014.00.00.1
Oil processing112.413.510.978.867.510.7119.10.01.94.20.10.0
Gas extraction129.992.261.9159.041.311.68.366.41.215.00.00.0
Coal160.90.00.07.864.268.334.411.89.90.50.033.3
Ferrous metals25.812.420.855.8142.857.923.44.34.8-0.514.70.7
Nonferrous metals33.2123.757.496.518.434.713.620.225.13.91.00.1
Chemicals44.726.953.843.667.042.831.927.74.08.43.712.3
Petrochemicals18.341.238.343.523.9103.827.85.537.242.61.10.9
Machine building46.719.463.225.847.047.315.625.28.48.9-0.319.6
Wood products19.541.115.867.827.682.915.517.410.015.128.011.2
Construction materials12.722.520.091.840.384.425.515.79.937.33.23.8
Glass industry0.00.00.0100.0150.050.00.00.066.60.00.00.0
Light industry26.627.429.277.930.029.718.445.324.914.09.118.1
Food industry67.231.918.048.229.744.024.313.813.730.521.215.3
1995
Total5.95.55.14.30.41.21.96.7-2.23.71.60.6
Electric energy5.5-1.9-2.4-2.6-27.5-5.95.849.7-17.55.61.1-7.6
Fuel29.82.6-1.87.20.70.00.91.30.12.9-0.10.1
Oil extraction69.52.9-1.54.01.00.00.00.00.04.20.00.0
Oil processing30.61.8-4.4-0.70.00.01.15.30.05.7-1.30.0
Gas extraction4.40.00.115.42.40.026.60.00.00.022.70.0
Coal23.63.00.00.0-3.83.40.20.00.20.0-0.60.1
Ferrous metals1.417.213.2-4.4-4.30.65.0-0.5-2.24.40.84.1
Nonferrous metals26.24.311.57.12.13.42.6-2.32.51.20.90.6
Chemicals8.78.13.56.812.24.11.01.5-1.5-1.60.92.2
Petrochemicals-2.95.43.826.3-1.7-0.8-1.3-0.1-3.8-1.60.60.3
Machine building7.711.37.63.64.90.7-3.56.32.09.40.63.6
Wood products10.16.43.82.81.71.0-0.71.11.31.32.50.6
Construction materials5.44.24.33.26.85.32.00.40.30.11.51.1
Glass industry0.00.00.00.00.00.00.00.00.00.00.00.0
Light industry3.05.87.46.15.52.4-0.13.03.92.96.02.9
Food industry10.15.44.52.83.90.51.32.51.65.84.53.6
Other-3.021.00.00.00.017.00.00.00.00.00.00.0
1996
Total3.53.00.41.01.51.9-0.31.31.02.40.90.7
Electric energy-0.12.00.91.34.97.52.65.10.19.42.20.1
Fuel7.32.20.61.00.20.00.80.00.20.40.21.9
Oil extraction0.06.61.82.10.1-0.40.00.00.10.10.20.3
Oil processing0.60.00.02.00.00.0-1.40.00.01.80.20.5
Gas extraction0.01.20.00.00.00.00.0-0.70.00.0-5.49.8
Coal19.80.20.1-0.40.50.33.00.00.3-0.10.73.7
Ferrous metals1.57.1-2.3-4.6-1.2-2.1-2.10.10.30.50.6-0.1
Nonferrous metals3.50.0-2.60.50.96.3-7.0-1.10.11.20.20.1
Chemicals-1.76.24.43.05.1-2.0-0.2-1.20.32.81.3-1.6
Petrochemicals0.01.10.00.010.53.90.0-0.30.00.00.00.0
Machine building6.16.22.33.61.41.60.41.30.62.91.21.0
Wood products4.61.3-1.11.30.3-1.1-0.20.1-1.0-2.8-0.81.1
Construction materials-0.53.04.95.13.50.2-1.02.30.51.74.60.6
Glass industry0.00.00.00.00.00.00.00.00.00.00.00.0
Light industry0.51.20.61.3-0.50.12.61.31.40.41.02.1
Food industry4.53.71.52.31.92.10.72.84.12.30.50.7
Other0.00.01.08.615.20.00.30.08.59.51.80.0
1997
Total5.31.00.8-0.10.30.41.6-0.10.41.0-0.30.9
Electric energy13.30.71.3-0.80.80.17.1-0.20.45.2-0.62.9
Fuel10.61.70.7-0.4-0.21.5-0.10.30.30.4-0.21.3
Oil extraction5.82.82.00.60.00.00.00.00.00.60.01.8
Oil processing19.20.8-0.1-3.3-0.75.5-0.30.11.02.00.30.7
Gas extraction0.00.00.50.04.10.00.00.00.00.05.40.0
Coal10.01.50.20.5-0.30.3-0.10.60.6-0.8-1.01.3
Ferrous metals-1.12.82.4-0.5-1.0-0.70.9-1.22.5-1.11.80.0
Nonferrous metals3.00.40.5-0.13.51.41.1-0.1-0.6-0.3-3.4-3.6
Chemicals-0.81.71.30.1-0.21.40.00.53.5-0.2-2.6-0.3
Petrochemicals0.00.00.00.00.00.00.00.00.00.00.00.0
Machine building3.80.5-1.61.4-0.80.60.8-0.2-0.3-0.90.24.1
Wood products-3.31.43.70.82.60.0-0.10.1-0.6-1.10.2-0.2
Construction materials-0.40.61.2-0.30.51.30.70.30.30.51.0
Glass industry0.00.00.00.00.00.00.00.00.00.00.00.0
Light industry0.4-0.91.10.40.40.00.00.10.1-0.20.00.0
Food industry0.41.40.40.3-0.4-0.8-0.1-0.20.10.40.70.7
(Percentage change over previous year)
Memorandum Items:
Total 19941,625.01,513.71,532.02,420.52,964.83,606.14,121.93,795.23,349.93,045.32,476.11,921.8
Total 19951,377.71,055.6837.9435.1291.6172.0104.192.461.147.745.740.2
Total 199637.234.028.023.925.326.123.417.221.019.518.718.8
Total 199720.518.118.617.316.014.316.515.014.412.911.511.7
Total 19986.4
Sources: National Statistical Agency; and Fund staff estimates.
Sources: National Statistical Agency; and Fund staff estimates.
Table 9.Kazakhstan: Energy Prices, 1994-97 1/(Monthly price, in Tenge)
Jan.Feb.Mar.Apr.MayJun.Jul.Aug.Sep.Oct.Nov.Dec.
1994
Crude oil (ton)1001001006337808801,6831,6831,7671,8202,0002,083
Natural gas (1000m3)5213488124139150250253291291291
Electricity (1000wh)9090903503707301,1201,1401,1701,2201,2401,260
Coal (ton)81818179146197319345365504504504
Gasoline (ton)6546786951,5731,6982,0804,4424,4425,1535,5796,0416,041
Diesel (ton)7067287571,3391,4632,0874,1194,1194,4014,4014,9014,901
Mazuth (ton)4524484717758239002,1212,1212,2662,2662,2692,322
1995
Crude oil3,1733,1733,1733,2003,2003,2003,2003,2003,2003,3753,3753,300
Natural gas291291291343349349404414415415454454
Eleotricity1,2601,2801,3001,3301,3351,3411,3601,3751,3801,4001,4351,460
Coal630653653653628649650650656656628628
Gasoline9,0749,1698,7698,9608,9608,9609,2318,9509,2669,2789,3249,324
Diesel6,4656,6156,6157,1837,1837,1837,1837,0517,1657,2537,2537,034
Mazuth3,7713,9453,5783,2133,2133,2133,0743,3743,3743,5733,4693,469
1996
Crude oil3,3303,5423,5953,6613,6653,6493,6503,6513,6553,6593,6653,676
Natural gas547551551551551551551549549549529546
Electricity1,5111,5591,5671,5871,6241,8401,9292,0462,0462,1752,1802,180
Coal776780778765769772782782785784788788
Gasoline9,5309,5309,53010,31210,31210,3129,9299,9299,9299,9439,9439,943
Diesel7,0567,0567,0567,4257,4257,4257,2647,2647,2647,2987,2987,298
Mazuth3,5063,4383,4383,1283,1283,1283,1283,1283,1283,3253,3253,390
Heating (Goal)7447487547658388438378428439681,0081,010
Liquid petroleum gas (ton)3,1293,1293,1293,3453,3453,3453,3453,3453,3453,3453,3453,345
1997
Crude oil3,9114,0164,0994,1274,1274,1274,1274,1274,1274,1564,1564,242
Natural gas547547548548563563563563563563594594
Electricity2,5892,6642,7262,7262,7382,7102,9882,9993,0212,9992,9703,093
Coal559575577582579581580580580577577577
Gasoline11,59811,81411,84811,84911,94813,16213,16613,18913,17713,25913,25413,263
Diesel8,7078,7298,7258,8558,9869,4489,5809,5849,5829,5819,5809,581
Mazuth4,2924,3154,2953,6393,3933,4173,2813,2813,4183,7093,7043,823
Heating (Goal)1,1171,0971,0971,1311,0941,0941,0921,0801,0821,2351,2351,252
Liquid petroleum gas (ton)3,8643,8713,8694,2494,2514,2674,2684,2704,2704,2704,2704,270
Sources: National Statistical Agency; and Fund staff estimates.

Producers’ ex-factory prices. Average prices for all customers.

Sources: National Statistical Agency; and Fund staff estimates.

Producers’ ex-factory prices. Average prices for all customers.

Table 10.Kazakhstan: Employment, 1993-97
19931994199519961997
(In thousands of people)
Employment
Total5,6305,4154,9944,3813,659
Sectors of material production3,8683,7373,3382,8392,378
Industry1,1951,1211,026916812
Construction492391325251193
Agriculture1,1081,1961,062883740
Forestry13111099
Transport497464418378320
Communication7982807767
Trade and public catering294264225166113
Marketing and purchasing9884716051
Information services108655
Other821161159468
Sectors of non-material production1,7621,6781,6561,5411,281
Municipal services252242249224165
Health and cultural services425425412389332
Education732697685632542
Culture and art9382816743
Science and scientific service7738373227
Credit and state insurance5249474336
Management apparatus132145146154135
(In percent of total)
Share of employment
Total100.0100.0100.0100.0100.0
Sectors of material production68.769.066.864.865.0
Industry21.220.720.520.922.2
Construction8.77.26.55.75.3
Agriculture19.722.121.320.220.2
Forestry0.20.20.20.20.2
Transport8.88.68.48.68.7
Communication1.41.51.61.81.8
Trade and public catering5.24.94.53.83.1
Marketing and purchasing1.71.61.41.41.4
Information services0.20.10.10.10.1
Other1.52.12.32.11.9
Sectors of non-material production31.331.033.235.235.0
Municipal services4.54.55.05.14.5
Health and cultural services7.57.88.28.99.1
Education13.012.913.714.414.8
Culture and art1.71.51.61.51.2
Science and scientific service1.40.70.70.70.7
Credit and state insurance0.90.90.91.01.0
Management apparatus2.32.72.93.53.7
Sources: National Statistical Agency; and Fund staff estimates.
Sources: National Statistical Agency; and Fund staff estimates.
Table 11.Kazakhstan: Labor Market, 1993-97
19931994199519961997
QIQIIQIIIQIVQIQIIQIIIQIVQIQIIQIIIQIVQIQIIQIIIQIVQIQIIQIIIQIV
(In thousands)
Number of job placement inquiries20.918.117.619.120.022.722.125.426.426.528.635.952.647.044.543.350.546.644.137.3
Number of people placed in jobs7.19.58.48.25.78.88.77.96.58.18.28.06.79.39.67.86.48.38.68.6
Number of people granted unemployment status7.36.25.67.07.98.99.411.514.414.116.123.135.832.731.630.532.532.930.831.9
Number of unemployed37.439.237.139.845.951.456.666.481.392.9103.3127.8183.3235.4263.1279.5293.1277.7268.7263.5
Of which
Beneficiaries18.018.516.315.017.421.225.130.240.749.054.165.8101.5140.9157.3167.5178.7177.8178.5176.9
Number of vacancies45.761.365.644.628.444.242.733.426.127.625.920.016.217.917.611.68.69.812.99.6
Hidden unemployment 1/2/144.8139.6147.7304.4675.6529.0477.0556.2746.5793.4766.6643.3579.4364.1317.1305.2331.7289.5240.3235.0
Total unemployment 3/182.2178.8184.8344.2721.5580.4533.6622.6827.8886.3869.9771.1762.7599.5580.2584.7624.8567.2509.0498.5
(In percent)
Official unemployment rate 4/0.50.60.50.60.60.70.81.01.21.51.82.12.73.53.94.14.34.14.03.9
Actual unemployment rate 5/2.12.02.14.49.27.26.88.111.312.111.513.011.48.98.68.69.28.37.57.3
Sources: National Statistical Agency, Ministry of Labor, and Fund staff estimates.

Defined as workers in part-time jobs and forced leave.

In March 1996, the Ministry of Labor introduced a new methodology of collecting data on hidden unemployment, which has resulted in a reduction in the number for hidden unemployment.

Unofficially unemployed persons are not included.

Ratio of number of officially unemployed to the labor force.

Ratio of number of officially unemployed plus that of hidden unemployed to the labor force.

Sources: National Statistical Agency, Ministry of Labor, and Fund staff estimates.

Defined as workers in part-time jobs and forced leave.

In March 1996, the Ministry of Labor introduced a new methodology of collecting data on hidden unemployment, which has resulted in a reduction in the number for hidden unemployment.

Unofficially unemployed persons are not included.

Ratio of number of officially unemployed to the labor force.

Ratio of number of officially unemployed plus that of hidden unemployed to the labor force.

Table 12.Kazakhstan: Nominal and Real Wages, 1994-98(In Tenge per month, unless otherwise indicated)
Jan.Feb.Mar.Apr.MayJun.Jul.Aug.Sep.Oct.Nov.Dec.
1994
Minimum wage304040100100100150150150200200200
Average wage 1/3313704758071,0361,3571,7261,9712,4513,0913,3603,392
Minimum real wage 2/7075641229162756660675853
Average real wage 2/7668749692838484961019688
Average wage (in U.S. dollars)363227312732384352636663
1995
Minimum wage200200250250250250280280280300300300
Average wage 1/3,5713,6504,1614,2824,6134,8305,1855,3525,7295,9636,1946,327
Minimum real wage 2/494654525150545352545150
Average real wage 2/8581888892949899104104103102
Average wage (in U.S. dollars)646269697376839395969899
1996
Minimum wage1,1001,1001,1001,4001,4001,4001,7001,7001,7002,0002,0002,000
Average wage 1/5,6345,7136,2186,5186,4526,7687,0637,1057,3497,5877,4237,674
Minimum real wage 2/174170167207203198236234232265258256
Average real wage 2/878692949193969698989496
Average wage (in U.S. dollars)8787959997101105105107108104105
1997
Minimum wage2,0302,0302,0302,0602,0602,0802,0852,0852,0852,3402,3402,340
Average wage 1/7,5067,4728,2017,9938,3138,7428,8828,6219,0549,2859,0359,205
Minimum real wage 2/255251249250249250249249250277273269
Average real wage 2/9290989598103103101106107103104
Average wage (in U.S. dollars)10299109106110116118114120123120121
1998
Minimum wage2,3602,3602,3602,3802,3802,3802,4002,4002,4002,4402,4402,440
Average wage 1/9,0169,005
Minimum real wage 2/267264262
Average real wage 2/10098
Average wage (in U.S. dollars)119118
Sources: National Statistical Agency; Ministry of Labor, and Fund staff estimates.

For December, excludes estimated bonus.

December 1993 = 100.

Sources: National Statistical Agency; Ministry of Labor, and Fund staff estimates.

For December, excludes estimated bonus.

December 1993 = 100.

Table 13.Kazakhstan: Wages by Sector, 1993-97 1/(In Tenge)
19931994199519961997
Total1281,7264,7866,8418,550
Sectors of material production1371,9605,3837,4479,244
Industry1712,8017,79210,19813,052
Construction1702,6607,8509,66011,087
Agriculture1011,0382,3923,5123,745
Forestry758702,4424,1655,225
Transport1822,4086,8089,45311,142
Communication1201,8215,8759,15610,041
Trade and public catering851,1753,3414,8835,835
Marketing and purchasing1402,0356,1088,7088,360
Information services1341,8255,4177,23410,997
Sectors of non-material production891,1583,4975,5927,111
Municipal services1021,6424,5756,7808,156
Health and cultural services667972,6754,5685,825
Education818932,9335,0696,250
Culture and art677712,3324,1495,549
Science and scientific service1191,4704,4836,7868,998
Credit and state insurance2884,17910,96713,02216,822
Management apparatus1391,7754,4757,2509,676
Sources: National Statistical Agency; and Fund staff estimates.

Data are not comparable with monthly wages in Table 12.

Sources: National Statistical Agency; and Fund staff estimates.

Data are not comparable with monthly wages in Table 12.

Table 14.Kazakhstan: Investment in Constant Prices, 1993-97(1991 = 100)
1993199419951996 1/1997
TotalStateTotalStateTotalStateTotalStateTotalState
Total investment32.424.427.514.015.87.99.44.38.72.7
Productive investment31.025.429.215.018.68.610.64.59.51.9
Industry42.035.150.022.229.911.417.54.918.21.6
Agriculture22.518.05.23.52.00.80.90.30.20.2
Transport and communication32.525.349.045.236.032.026.124.214.813.4
Construction10.56.45.50.73.90.62.61.60.90.6
Trade and catering4.92.23.40.65.00.54.11.00.90.4
Other46.753.3112.538.512.55.135.74.623.21.7
Non-productive investment35.422.423.911.911.04.46.73.97.04.4
Housing28.917.414.69.88.63.75.22.28.73.5
Other48.332.342.316.012.54.89.67.05.86.2
Memorandum item:
Index of houses constructed62.936.727.1
Sources: National Statistical Agency; and Fund staff estimates.

Adjusted for underreporting.

Sources: National Statistical Agency; and Fund staff estimates.

Adjusted for underreporting.

Table 15.Kazakhstan: Financing of Investment, 1993-97
19931994199519961997
(In millions of Tenge)
All resources5,51680,945148,590118,981114,969
State enterprises4,16241,25766,84748,99732,016
Budget resources1,0867,3326,0758,33515,232
Own resources3,07533,92660,70540,66216,784
Other 1/1,35439,68881,74369,98482,953
(In percent of total resources)
State enterprises75.551.045.041.227.8
Budget resources19.79.14.17.013.2
Own resources55.841.940.934.214.6
Other 1/24.549.055.058.872.2
Sources: National Statistical Agency; and Fund staff estimates.

Includes mainly private sector investment.

Sources: National Statistical Agency; and Fund staff estimates.

Includes mainly private sector investment.

Table 16.Kazakhstan: Sectoral Composition of Capital Investment, in Current Prices, 1994-97(In percent of total investment)
1994199519961997 1/
Total100.0100.0100.0100.0
For production facilities72.875.077.474.5
Industry55.257.355.962.7
Electric power generation7.18.210.64.3
Oil extraction industry24.420.520.735.7
Oil refining industry2.52.22.11.4
Gas industry1.31.92.61.9
Coal industry5.04.53.53.6
Ferrous metallurgy4.05.72.83.4
Nonferrous metallurgy5.39.67.95.2
Construction materials industry0.50.31.11.7
Light industry0.30.10.10.0
Medical industry0.10.10.10.0
Machine building and metalworking0.60.60.50.3
Other4.13.63.95.0
Agriculture6.03.63.30.9
Forestry0.00.00.10.0
Transportation7.34.69.57.4
Other4.29.48.63.5
For nonproduction facilities27.225.122.625.5
Housing construction12.412.612.013.7
Municipal construction7.25.83.66.2
Consumer services0.10.10.00.0
Public health and social security2.93.02.61.4
Public education1.00.90.61.0
Culture and art0.50.40.30.2
Scientific research0.00.00.00.0
Other nonproduction sectors3.22.33.42.9
Sources: National Statistical Agency; and Fund staff estimates.

Preliminary estimates.

Sources: National Statistical Agency; and Fund staff estimates.

Preliminary estimates.

Table 17.Kazakhstan: Savings, Investment and Growth, 1994-97
1994199519961997
(In percent of GDP)
Savings and investment
Investment22.620.511.812.9
Gross capital formation20.017.910.711.9
Public sector9.76.73.73.7
Of which
Budget2.61.01.72.0
Private 1/10.311.27.08.2
Change in stocks2.62.61.11.0
Financed by:
Total savings22.620.511.812.9
National savings14.017.48.28.7
Budget 2/3/-4.8-2.2-3.5-5.0
Private18.819.611.713.7
Foreign savings 4/8.63.13.64.2
(Percent change over previous year)
Real GDP-12.6-8.20.52.0
Real GDP per capita-11.8-4.31.23.6
Memorandum items:
Total factor productivity-8.51.53.8
Labor force growth-3.0-3.0-2.0-2.2
Inflation (CPI, end-of-period)1,160.360.428.611.3
Fiscal deficit (percent of GDP) 3/-7.4-3.2-5.2-7.0
Sources: Kazakh authorities; and Fund staff estimates.

This reflects in part reclassification of the public sector to the private sector due to privatization.

Government savings equal revenues minus current expenditures, equivalent to deficit (calculated from fiscal data on revenues and expenditures) plus investment.

Excludes privatization proceeds from revenue.

Foreign savings equal the current account deficit.

Sources: Kazakh authorities; and Fund staff estimates.

This reflects in part reclassification of the public sector to the private sector due to privatization.

Government savings equal revenues minus current expenditures, equivalent to deficit (calculated from fiscal data on revenues and expenditures) plus investment.

Excludes privatization proceeds from revenue.

Foreign savings equal the current account deficit.

Table 18.Kazakhstan: Privatization of State Enterprises, 1994-97(Units)
Before1994199519961997
1994
Small-scale privatization5,5782,7482,4773,3935,590
Mass privatization1474971,122
Privatization in agriculture91851313818
Case-by-case privatization52847
Total9,2694,1473,1424,0566,777
Sources: Ministry of Finance; National Statistical Agency; and Fund staff estimates.
Sources: Ministry of Finance; National Statistical Agency; and Fund staff estimates.
Table 19.Kazakhstan: Privatized Enterprises by Sectors, 1994-97
1994199519961997
(Units)
Industry21148437608
Construction1105245162
Agriculture91851413818
Transport18028101331
Trade and catering1,3941,3581,5191,279
Personal and public services587337280689
Other sectors7478061,5363,690
Of which
Incompleted units161931226
Total4,1473,1434,0566,777
(In percent of total)
Industry5.11.510.89.0
Construction2.71.71.12.4
Agriculture22.116.43.40.3
Transport4.30.92.54.9
Trade and catering33.643.237.518.9
Personal and public services14.210.76.910.2
Other sectors18.025.637.954.4
Of which
Incompleted units0.40.60.83.3
Total100.0100.0100.0100.0
Sources: Ministry of Finance; National Statistical Agency; and Fund staff estimates.
Sources: Ministry of Finance; National Statistical Agency; and Fund staff estimates.
Table 20.Kazakstan: Summary Accounts of National Bank of Kazakhstan, 1994-98 1/(In millions of Tenge, end-period stocks at current prices unless otherwise indicated)
19941995199619971998
Dec.Dec.Dec.Mar.Jun.Sep.Dec.Mar.
Net international reserves49,55576,277101,92598,356110,489124,573131,286114,584
Foreign exchange 2/29,04642,74853,06751,02964,92679,65791,70972,980
Assets45,44372,18096,28592,724108,434119,832130,550110,581
Liabilities, short-term16,39729,43243,21841,69543,50740,17538,84137,601
Gold20,50933,53048,85847,32745,56344,91639,57841,604
Net domestic assets 3/-16,203-12,324-26,742-25,017-29,994-37,740-24,382-22,601
Domestic credit27,11132,29024,31626,10918,89815,48023,07929,601
Credit to Government, net11,89924,82523,51624,39911,89810,14621,32724,259
Credit to banks, net13,3557,3286271,5356,8225,1341,3935,150
Credit13,35510,4879,79211,27010,20511,5228,2488,146
Special deposits (NBK notes)0-3,160-9,165-9,735-3,382-6,388-6,855-2,996
Credit to the economy1,857137172175177200359193
Other items (net) 3/-43,314-44,614-51,057-51,126-48,892-53,220-47,461-52,203
Reserve money33,35163,95475,18473,33980,49586,833106,90391,983
Currency outside NBK20,59248,64364,26963,94370,38278,66196,51884,058
Currency held by public20,25547,99862,81261,43967,56375,09892,78280,022
Currency held by commercial banks3376451,4572,5042,8203,5633,7364,036
Commercial bank deposits9,09511,8128,1886,2667,6486,00210,2547,776
Reserves717505504539363128
Correspondent accounts8,33211,2698,1346,2187,6075,4519,5527,374
Other deposits4639522515671374
Demand, time and enterprise deposits3,6643,4982,7263,1312,4642,170131149
Memorandum items:
Change from end of previous quarter/year 4/
Net international reserves26,72325,648-3,56912,13314,0846,713-16,702
Credit to government (net)12,926-1,309883-12,501-1,75211,1802,932
Credit to banks-6,027-6,7019085,287-1,689-3,7413,753
Reserve money
Percentage change from end of previous quarter23.216.0-2.59.87.923.1-14.0
Percentage change from end of previous year91.817.6-2.57.115.542.2-14.0
Sources: Kazakh authorities; and Fund staff estimates.

The accounts of the Budget Bank, which came into existence in 1996 and was dissolved at end-1997, have been consolidated with those of the National Bank of Kazakhstan for the appropriate periods.

Convertible currencies

Including certain medium and long term foreign liabilities.

Compared to the previous year for 1995-1996 and compared to the previous quarter for 1997.

Sources: Kazakh authorities; and Fund staff estimates.

The accounts of the Budget Bank, which came into existence in 1996 and was dissolved at end-1997, have been consolidated with those of the National Bank of Kazakhstan for the appropriate periods.

Convertible currencies

Including certain medium and long term foreign liabilities.

Compared to the previous year for 1995-1996 and compared to the previous quarter for 1997.

Table 21.Kazakhstan: Monetary Survey, 1994-98(In millions of Tenge, end-period stocks at current prices unless otherwise indicated)
19941995199619971998
Dec.Dec.Dec.Mar.Jun.Sep.Dec.Mar.
Net international reserves40,36893,229117,041112,282125,373141,023139,881123,436
Foreign exchange 1/19,85959,68067,93464,94479,36796,090100,30381,832
Assets59,47999,414113,576111,196124,294138,340142,482121,702
Liabilities, short-term39,62039,73445,64246,25244,92742,25042,17939,870
Gold20,50933,54949,10747,33946,00644,93339,57841,604
Net domestic assets 2/16,73124,46616,90623,01217,60920,24437,34429,676
Domestic credit124,46996,44884,52396,90386,881100,261112,815111,415
Credit to Government10,83124,51420,85125,55716,51917,71535,58727,187
Credit to the economy113,63871,93463,67271,34670,36282,54777,22884,228
Other items (net) 2/-107,739-71,981-67,618-73,891-69,272-80,017-75,471-81,740
Broad money57,099117,695133,946135,294142,982161,267177,240153,112
Currency in circulation20,25547,99862,81261,43967,56375,09892,78280,022
Deposits 3/36,75267,79571,04073,77775,36686,14084,42173,058
Nonbank institutions26,72545,20639,02442,82538,04444,00156,79745,032
Tenge12,29119,07716,28514,31917,49422,69745,10030,748
Convertible foreign exchange13,81825,19522,07927,45419,80720,22611,03113,558
Nonconvertible foreign exchange6159346601,0527431,078665727
Households10,02722,58932,01730,95237,32242,13927,62428,026
Tenge9,06419,07926,00123,68329,92234,47420,73420,315
Convertible foreign exchange9633,5096,0007,2547,3857,6506,8777,694
Nonconvertible foreign exchange01151515151417
Bonds/promissory notes of banks921,902947853303631
Memorandum items:
Change from end of previous quarter/year 4/
Net international reserves52,86123,812-4,75813,09115,650-1,443-16,445
Credit to government (net)13,683-3,6634,705-9,0371,19612,554-1,400
Credit to economy-41,704-8,2627,674-98412,185-5,3197,000
Broad money
Percentage change from end of previous quarter24.311.91.05.712.89.9-13.6
Percentage change from end of previous year106.113.81.06.720.432.3-13.6
Sources: Kazakh authorities; and Fund staff estimates.

Convertible currencies.

Including certain medium and long term foreign liabilities.

The composition of deposits at end-December 1997 not strictly comparable to previous periods due to introduction of a new chart of accounts. Inter alia, consumer cooperative accounts are classified with nonbank institutions at end-December 1997 but with households prior to that.

Compared to the previous year for 1995-1996 and compared to the previous quarter for 1997.

Sources: Kazakh authorities; and Fund staff estimates.

Convertible currencies.

Including certain medium and long term foreign liabilities.

The composition of deposits at end-December 1997 not strictly comparable to previous periods due to introduction of a new chart of accounts. Inter alia, consumer cooperative accounts are classified with nonbank institutions at end-December 1997 but with households prior to that.

Compared to the previous year for 1995-1996 and compared to the previous quarter for 1997.

Table 22.Kazakhstan: Interest Rates, 1995-98(In percent; end-of-period)
InflationNBK refinance rateNBK Lombard rateNBK overnightYield on 3-monthCommercial bank short-Commercial bank time deposit rates 1/2/
Year-on-yearrateTreasury billsterm lending rates 1/2/HouseholdsLegal entities
1995
December60.452.568.058.891.125.765.0
1996
January53.359.070.056.987.125.059.8
February47.350.060.054.286.623.558.1
March42.544.052.047.085,225.256.6
April42.140.047.033.969.923.653.6
May41.140.047.033.369.222.641.4
June41.436.043.034.972.222.135.8
July39.932.037.034.259.319.632.8
August38.032.037.029.354.819.433.7
September36.432.037.033.265.719.537.1
October34.835.039.035.149.417.035.5
November32.235.039.032.345.116.728.1
December28.635.039.032.346.016.022.0
1997
January26.235.039.028.040.316.430.3
February25.235.039.026.837.414.825.1
March24.135.030.025.024.636.513.525.9
April21.535.030.025.021.735.913.022.3
May19.630.028.023.012.939.412.919.7
June17.724.023.021.013.937.611.317.8
July16.421.019.017.014.637.38.216.0
August15.221.019.017.012.835.08.015.2
September13.719.517.516.012.634.57.213.1
October11.818.516.515.012.828.86.512.9
November10.818.516.515.014.628.75.914.4
December11.318.516.515.016.123.76.011.8
1998
January11.018.515.823.45.511.5
February10.318.516.823.65.410.8
March10.218.518.222.55.010.0
April9.918.517.5
May9.818.516.0
Source: National Bank of Kazakhstan.

Credits and deposits in Tenge.

Rates on existing stocks of credits and deposits through December 1996, rates on new credits and deposits thereafter.

Source: National Bank of Kazakhstan.

Credits and deposits in Tenge.

Rates on existing stocks of credits and deposits through December 1996, rates on new credits and deposits thereafter.

Table 23.Kazakhstan: Interbank Currency Exchange (KICEX) Auction Rates, 1994-98
Tenge per U.S. dollarTenge per deutsche markTenge per 1,000 Russian ruble
Period averageEnd-of-periodPeriod averageEnd-of-periodPeriod average 1/End-of-period 1/
1994
January9.1910.715.936.45
February11.5111.586.997.30
March17.5119.9410.0911.35
April26.2529.9214.5716.53
May38.5240.7321.3222.95
June42.0243.2922.5821.94
July44.9245.3329.5429.3421.6020.00
August45.7546.1629.5430.1621.0121.51
September47.1748.0030.5330.8020.8218.90
October48.7349.5532.3733.4316.3515.48
November51.0752.1033.6533.8415.9116.15
December53.6154.2634.4135.0016.2116.15
1995
January55.7657.1536.5738.0014.6314.25
February58.8959.8039.2640.8013.8013.34
March60.6261.3043.1344.4012.9012.20
April62.2062.8045.3945.9512.4912.40
May63.1863.4545.2745.8012.4012.50
June63.5363.3345.7446.0013.5514.25
July62.3059.4545.2743.3513.8513.60
August57.3759.1340.0240.5013.0913.40
September60.2761.1541.5243.5013.4813.70
October61.8562.7143.9343.2313.8113.95
November63.5264.0545.0244.7014.0214.14
December63.9263.9744.5044.4513.7513.80
1996
January64.6165.3044.3944.0713.7713.65
February65.3865.3644.6645.0513.7213.53
March65.1565.2544.2844.3613.4713.38
April65.8366.5043.9243.7013.4313.47
May66.8166.7143.6743.3813.4013.30
June67.0267.1843.9543.9713.2613.16
July67.3667.6244.8245.8013.2213.33
August67.6768.1445.9146.44
September68.9369.5445.8845.75
October69.9970.1246.0446.58
November71.0972.7147.1547.50
December73.3273.8047.3347.70
1997
January75.4475.7947.1946.69
February75.6775.6245.5445.06
March75.1974.3544.6944.48
April75.0375.4944.2244.07
May75.5075.4844.6944.75
June75.4975.5743.8943.61
July75.5975.7442.6041.12
August75.7975.8041.3142.50
September75.7775.7342.3442.86
October75.6975.8043.1744.34
November75.7575.8044.2943.43
December75.8275.8942.9944.20
1998
January76.3276.40
February76.4076.38
March76.5076.61
April76.7176.80
May76.8276.87
Source: National Bank of Kazakhstan.

Auctions for Russian rubles ceased to be held from July 1996. The activity for German Marks is low and not followed any longer.

Source: National Bank of Kazakhstan.

Auctions for Russian rubles ceased to be held from July 1996. The activity for German Marks is low and not followed any longer.

Table 24.Kazakhstan: Number of Commercial Banks and Branches, 1995-98(End-of-period)
Commercial banksBranches
StateInterstateWith Foreign CapitalOtherTotalTotal
Total of which subsidiaries
1995
December41001251301,036
1996
March611261101291,013
June51126951131,006
September517689102990
December517688101949
1997
January618586101944
February617686100932
March61958197785
April61958197786
May61958096784
June61958096783
July611957298733
August611957298640
September611956490637
October612176290598
November612176290598
December512075682582
Source: National Bank of Kazakhstan.
Source: National Bank of Kazakhstan.
Table 25.Kazakhstan: Government Budgetary Operations, 1995-98 1/(In billions of Tenge)
1995199619971998
Jan.-Mar.Jan.-Jun.Jan.-Sep.Jan.-Dec.RevisedJan.-Mar.Jan.-Dec.
budgetBudget
Total revenue and grants178.3218.345.1108.0199.8281.6290.366.8321.6
Total revenue178.3218.345.1108.0199.8280.9289.463.9314.1
Current revenue171.2187.238.691.5144.9221.6250.356.8263.1
Tax revenue131.6160.635.283.8131.9203.9218.152.8245.3
Tax on income, profits and capital gains58.864.515.637.357.281.485.717.6103.4
Domestic taxes on good and services39.775.014.833.353.891.4102.028.0107.1
Taxes on international trade12.89.01.33.25.28.18.32.19.1
Other taxes20.312.13.510.015.723.022.05.125.7
Nontax revenue39.626.63.47.713.017.732.34.017.8.
Capital revenue7.231.16.516.554.959.339.17.151.0
Privatization receipts7.231.16.115.551.554.531.06.045.0
Other0.00.00.41.03.44.78.11.16.0
Total grants0.00.00.00.00.00.70.92.97.5
Expenditure and net lending211.2262.849.6119.9208.8346.2354.068.5432.1
Expenditure191.2245.748.5114.6195.8322.5331.663.1398.7
General Government services25.431.64.210.416.631.835.13.737.6
Defense10.815.02.55.39.517.216.82.020.0
Public order and security15.823.64.811.317.228.828.24.334.1
Education45.648.715.334.350.373.058.914.071.9
Health30.539.76.414.822.935.046.04.629.0
Social insurance and social security7.843.34.510.716.926.438.510.084.4
Recreation and culture5.613.12.45.97.711.010.71.712.5
Fuel and energy complex1.11.40.10.50.81.11.10.11.2
Agriculture, forestry, and nature conservation7.29.31.03.37.010.911.00.99.2
Mining and minerals, processing, construction3.66.10.31.14.65.74.70.11.5
Transportation and communications0.10.10.10.20.30.40.30.10.3
Other economic services4.36.42.85.19.425.430.93.417.9
Other expenditure33.4 2/7.44.111.732.755.849.311.379.1
Net lending20.017.11.15.313.023.722.42.133.4
Regular budget balance-32.9-44.5-4.6-11.9-9.1-64.6-63.7-1.7-110.5
Quasi-fiscal operations (surplus+)6.00.00.00.00.00.00.00.00.0
Overall budget balance-25.2-44.5-4.6-12.7-9.1-64.6-63.7-1.7-110.5
Statistical discrepancy-6.2-8.73.4-10.63.1-3.90.0-4.00.0
Financing20.735.87.92.012.260.763.7-2.3110.5
Domestic, net0.4-1.67.5-2.6-0.316.313.5-6.1
Banking system9.7-3.74.7-4.3-3.114.95.6-8.4
Nonbank-9.32.02.81.82.81.47.92.3
Foreign, net20.237.40.44.612.544.450.23.9
Memorandum items:
Revenues excluding privatization receipts171.2187.239.092.5148.3226.4258.557.9269.1
Budget balance excluding privatization receipts-32.4-75.6-10.6-27.3-60.6-119.1-94.6-7.7-155.5
Sources: Ministry of Finance; and Fund staff calculations.

Includes financial operations of the consolidated state budget (republican and local budgets) and net position of extrabudgetary funds.

Includes T 21.4 billion in expenditures related to called foreign loan guarantees.

Sources: Ministry of Finance; and Fund staff calculations.

Includes financial operations of the consolidated state budget (republican and local budgets) and net position of extrabudgetary funds.

Includes T 21.4 billion in expenditures related to called foreign loan guarantees.

Table 26.Kazakhstan: Government Budgetary Operations, 1995-98 1/(In percent of GDP)
1995199619971998
Jan.-Mar.Jan.-Jun.Jan.-Sep.Jan.-Dec.RevisedJan.-Mar.Jan.-Dec.
budgetBudget
Total revenue and grants17.615.412.814.816.316.517.117.116.0
Total revenue17.615.412.814.816.316.517.016.315.7
Current revenue16.913.210.912.511.813.014.714.513.1
Tax revenue13.011.310.011.410.812.012.813.512.2
Tax on income, profits and capital gains5.84.64.45.14.74.85.04.55.2
Domestic taxes on good and services3.95.34.24.64.45.46.07.25.3
Taxes on international trade1.30.60.40.40.40.50.50.50.5
Other taxes2.00.91.01.41.31.41.31.31.3
Nontax revenue3.91.90.91.11.11.01.91.00.9
Capital revenue0.72.21.82.34.53.52.31.82.5
Privatization receipts0.72.21.72.14.23.21.81.52.2
Other0.00.00.10.10.30.30.50.30.3
Total grants0.00.00.00.00.00.00.10.70.4
Expenditure and net lending20.818.614.016.417.120.320.817.521.5
Expenditure18.917.413.715.716.019.019.516.119.9
General Government services2.52.21.21.41.41.92.10.91.9
Defense1.11.10.70.70.81.01.00.51.0
Public order and security1.61.71.41.51.41.71.71.11.7
Education4.53.44.34.74.14.33.53.63.6
Health3.02.81.82.01.92.12.71.21.4
Social insurance and social security0.83.11.31.51.41.62.32.64.2
Recreation and culture0.60.90.70.80.60.60.60.40.6
Fuel and energy complex0.10.10.00.10.10.10.10.00.1
Agriculture, forestry, and nature conservation0.70.70.30.50.60.60.60.20.5
Mining and minerals, processing, construction0.40.40.10.10.40.30.30.00.1
Transportation and communications0.00.00.00.00.00.00.00.00.0
Other economic services0.40.50.80.70.81.51.80.90.9
Other expenditure3.3 2/0.51.21.62.73.32.92.93.9
Net lending2.01.20.30.71.11.41.30.51.7
Regular budget balance-3.2-3.1-1.3-1.6-0.7-3.8-3.7-0.4-5.5
Quasi-fiscal operations (surplus +)0.60.00.00.00.00.00.00.00.0
Overall budget balance-2.5-3.1-1.3-1.7-0.7-3.8-3.7-0.4-5.5
Statistical discrepancy-0.6-0.61.0-1.50.3-0.20.0-1.00.0
Financing2.02.52.20.31.03.63.7-0.65.5
Domestic, net0.0-0.12.1-0.40.01.00.8-1.6
Banking system1.0-0.31.3-0.6-0.30.90.3-2.1
Nonbank-0.90.10.80.20.20.10.50.6
Foreign, net2.02.60.10.61.02.63.01.0
Memorandum items:
Revenues exlcuding privatization receipts (in percent of GDP)16.913.211.012.612.113.315.214.813.4
Budget balance excluding privatization receipts (in percent of GDP)-3.2-5.3-3.0-3.7-4.9-7.0-5.6-2.0-7.8
Sources: Ministry of Finance; and Fund staff calculations.

Includes financial operations of the consolidated state budget (republican and local budgets) and net position of extrabudgetary funds.

Includes T 2.1 percent of GDP in expenditures related to called foreign loan guarantees.

Sources: Ministry of Finance; and Fund staff calculations.

Includes financial operations of the consolidated state budget (republican and local budgets) and net position of extrabudgetary funds.

Includes T 2.1 percent of GDP in expenditures related to called foreign loan guarantees.

Table 27.Kazakhstan: Government Budgetary Operations, 1995-98 1/(In percent of total)
1995199619971998
Jan.-Mar.Jan.-Jun.Jan.-Sep.Jan.-Dec.RevisedJan.-Mar.Jan.-Dec.
budgetEstimateBudget
Total revenue and grants100.0100.0100.0100.0100.0100.0100.0100.0100.0
Total revenue100.0100.0100.0100.0100.099.799.795.797.7
Current revenue96.085.885.684.772.578.786.285.081.8
Tax revenue73.873.678.177.666.072.475.179.076.3
Tax on income, profits and capital gains33.029.534.634.628.628.929.526.332.2
Domestic taxes on good and services22.234.432.830.926.932.535.141.933.3
Taxes on international trade7.24.12.92.92.62.92.93.12.8
Other taxes11.45.57.99.27.88.27.67.68.0
Nontax revenue22.212.27.47.16.56.311.16.05.5
Capital revenue4.014.214.415.327.521.013.510.615.8
Privatization receipts4.014.213.514.325.819.410.79.014.0
Other0.00.01.01.01.71.72.81.61.9
Total grants0.00.00.00.00.00.30.34.32.3
Expenditure and net lending100.0100.0100.0100.0100.0100.0100.0100.0100.0
Expenditure90.593.597.795.693.893.293.792.192.3
General Government services12.012.08.58.78.09.29.95.48.7
Defense5.15.75.14.44.65.04.72.94.6
Public order and security7.59.09.69.48.28.38.06.37.9
Education21.618.530.828.624.121.116.620.416.6
Health14.415.112.912.310.910.113.06.76.7
Social insurance and social security3.716.59.28.98.17.610.914.619.5
Recreation and culture2.75.04.94.93.73.23.02.52.9
Fuel and energy complex0.50.50.20.40.40.30.30.10.3
Agriculture, forestry, and nature conservation3.43.52.12.83.43.13.11.32.1
Mining and minerals, processing, construction1.72.30.60.92.21.61.30.10.3
Transportation and communications0.00.00.10.20.20.10.10.10.1
Other economic services2.02.45.54.34.57.38.75.04.1
Other expenditure15.82.88.39.715.616.113.916.518.3
Net lending9.56.52.34.46.26.86.33.17.7
Sources: Ministry of Finance; and Fund staff calculations.

Includes financial operations of the consolidated state budget (republican and local budgets) and net position of extrabudgetary funds.

Includes T 21.4 billion in expenditures related to called foreign loan guarantees.

Sources: Ministry of Finance; and Fund staff calculations.

Includes financial operations of the consolidated state budget (republican and local budgets) and net position of extrabudgetary funds.

Includes T 21.4 billion in expenditures related to called foreign loan guarantees.

Table 28.Kazakhstan: Balance of Payments, 1994-98(In millions of U.S. dollars)
19941995199619971998
QI
Current account-905-516-752-953-50
Trade balance-920-222-326-38540
Exports (f.o.b.)3,2855,1646,2926,7691,515
Non-oil exports2,6484,2574,9505,229n.a.
Oil-exports6389071,3421,540n.a.
Imports, (f.o.b.)-4,205-5,387-6,618-7,154-1,475
Non-oil imports-3,916-5,149-6,304-6,772n.a.
Oil-imports-289-237-314-382n.a.
Services, net-82-353-475-642-106
Non-Factor services (net)-35-208-253-336-51
Credit427535675853n.a.
Transport312352432494n.a.
Other116184243359n.a.
Debit-462-743-928-1,189n.a.
Transport-221-265-357-391n.a.
Other-242-478-571-798n.a.
Factor services (net)-47-145-222-306-54
Interest 1/-47-65-78-133-38
Credit94029505
International reserves13319495
CIS debtors871010
Debit-48-105-107-183-43
IMF-5-17-23-24-6
Other0-88-84-159-37
Other factor services0-80-144-173-16
Unrequited transfers9759507516
Capital account1,1941,1601,3741,59448
Medium and long term credits69756948675227
Drawings on official loans (net)33235235224451
Drawings on trade credits4252651433329
Bond issue (net)002003500
Of which
Government002003500
Amortization 1/-61-48-210-173-33
Of which
Other CIS0193000
Of which
Russia0-23000
Other banking system (MR)-137043-922
Non-bank portfolio investment (net)07245414
Direct investment (net)6359641,1371,32076
Capital transfers (migrants-net)-1,065-381-316-440-71
Errors and omissions (net)8-488-567-152-258
Overall balance29815655490-260
Financing-298-156-55-490260
NIR of the NBK (increase -)-326-375-228-490260
Foreign exchange assets (net)-176-232-55-490260
Of which
Fund credit (net)192142135-6-19
Purchases19214213500
SBA19214213500
Repurchases000-6-19
Exceptional financing-121219000
Arrears reduction (-)01000
Interenterprise arrears (net)-1210000
Debt relief from Russia0217000
Memorandum items:
GDP (in U.S. dollars)10,55516,55820,81022,5145,196
Current account / GDP-8.6-3.1-3.6-4.2
NBK gross international reserves1,9802,2522,116
In months of imports of goods and nonfactor services3.13.2
Stock of external debt (in millions of U.S. dollar)3,4283,8894,5874,640
In percent of GDP20.718.720.4
External debt service
In percent of exports of goods and nonfactor services2.74.65.8
Sources: Data provided by the Kazak authorities; and Fund staff estimates.

In the context of the CG-meeting held in May 1995, Russia agreed to provide debt relief during 1995 and through end-June 1996. For 1995, this debt relief was estimated at US$217 million (including US$195 million and US$23 million of interest and amortization obligations, respectively), and at US$183 million from January-June 1996. The medium-term projection excludes transactions related to both debt owed to Russia and the rental payments on Baikonour.

Sources: Data provided by the Kazak authorities; and Fund staff estimates.

In the context of the CG-meeting held in May 1995, Russia agreed to provide debt relief during 1995 and through end-June 1996. For 1995, this debt relief was estimated at US$217 million (including US$195 million and US$23 million of interest and amortization obligations, respectively), and at US$183 million from January-June 1996. The medium-term projection excludes transactions related to both debt owed to Russia and the rental payments on Baikonour.

Table 29.Kazakhstan: Composition of Exports, 1995-97
199519961997
units for volumeVolumePrice 1/ValueVolumePrice 1/ValueVolumePrice 1/Value
(In millions of U.S. dollars)(In millions of U.S. dollars)(In millions of U.S. dollars)
Customs exports
Oil and gas condensatethousand tons13,000.069.8907.415,350.087.41,341.614,900.0103.41,540.0
Coalthousand tons23,700.018.3433.420,000.014.3286.024,900.014.7364.9
Oil refining productsthousand tons900.086.477.8850.094.280.11,400.087.3122.2
Aluminathousand tons760.9182.2138.6973.8160.4156.21,201.9124.4149.5
Refined copperthousand tons216.62,636.2571.0245.92,175.0534.8287.92,100.4604.7
Unrefined zincthousand tons147.7974.3143.9140.6960.9135.1191.11,147.0219.2
Unrefined leadthousand tons58.2530.030.856.7784.844.577.8636.249.5
Chromium ores and concentratesthousand tons1,029.654.756.3218.656.712.4579.627.115.7
Iron ores and concentratesthousand tons3,390.035.7121.03,457.023.480.99,271.020.9193.7
Ferroalloysthousand tons578.3514.6297.6452.4404.1182.8404.8279.4113.1
Rolled ferrous metalthousand tons1,694.0279.9474.21,903.2282.6537.92,795.6252.0704.5
Yellow phosphorusthousand tons21.21,269.026.927.71,258.034.817.61,136.420.0
Grainthousand tons4,100.085.6351.02,900.0154.644833,577.5143.1511.8
Cotton fiberthousand tons64.71,223.079.169.71,385.096.563.91,212.877.5
Woolthousand tons51.71,002.051.813.81,181.216.321.81,233.926.9
Natural gasmillion cubic meters2,565.67.619.52,341,813.130.62,431.88.520.6
Large hidesthousand pieces3,523.014.350.435.146.6
Small hidesthousand pieces10,480.01.717.824.015.3
Others1,142.81,154.61,570.6
Total custom exports4,991.35,232.66,366.3
Operations not included in customs statistics21.6678.44.9
Shuttle exports151.1381.0398.2
Total exports5,164.06,292.06,769.4
Source: Kazakh authorities, and staff estimates.

U.S. dollars per unit (ton or piece) except for natural gas which is in U.S. dollars per thousand cubic meters.

Source: Kazakh authorities, and staff estimates.

U.S. dollars per unit (ton or piece) except for natural gas which is in U.S. dollars per thousand cubic meters.

Table 30.Kazakhstan: Composition of Imports, 1995-97
199519961997
VolumePrice 1/ValueVolumePrice 1/ValueVolumePrice 1/Value
Units for volume(In millions of U.S. dollars)(In millions of U.S. dollars)(In millions of U.S. dollars)
Customs imports
Oil and gas condensatethousand ton3,500.056.5197.83,600.087.1313.61,700.097.8166.3
Oil refining productsthousand ton700.057.940.5500.0168.784.4442.5196.887.1
Electricitymillion kilowatt-hours7,400.031.5233.16,615.036.5241.23,458.027.294.2
Natural gasmillion cubic meters9,128.040.7371.85,494.537.5205.83,003.730.792.3
Coalthousand ton2,000.029.258.41,060.030.131.91.027.326.8
Rolled ferrous metalsthousand ton30.3485.214.737.0621.623.042.3583.924.7
Pharmacological products25.837.957.9
Chemical industry products422.4500.0610.5
Equipment and mechanical tools522.8523.5669.9
Electrical equipment237.2293.0333.4
Foodstuffs402.7446.7507.9
Nonfood consumer goods143.8107.5517.9
Vehicles266.4361.4367.7
Others834.8784.2718.5
Total customs imports3,772.23,954.04,275.1
Operations not included in customs statistics8.77.0130.4
Shuttle imports1,347.12,772.03,081.0
Other corrections259.0-115.0-376.7
Grants25.05.028.3
Non-equivalent barter536.0239.032.0
Freight-302.0-359.0-437.0
Total imports5,387.06,618.07,154.8
Source: Kazakh authorities, and staff estimates.

U.S. dollars per ton except for natural gas which is in U.S. dollars per thousand cubic meters and electricity which is in U.S. dollars per thousand kilowatt-hours.

Source: Kazakh authorities, and staff estimates.

U.S. dollars per ton except for natural gas which is in U.S. dollars per thousand cubic meters and electricity which is in U.S. dollars per thousand kilowatt-hours.

Table 31.Kazakhstan: Geographical Distribution of Exports of Energy Sources to the Baltics, Russia and Other States of the Former Soviet Union, 1993-97
19931994199519961997
(In thousands of tons)
Oil and gas condensate
Total11,740.06,592.26,707.210,567.55,213.4
Azerbaijan946.8606.934.10.038.6
Belarus95.015.00.00.020.1
Kyrgyz Republic0.00.00.00.41.5
Lithuania0.055.3880.01,763.8344.0
Russia10,343.34,741.14,708.26,737.31,608.8
Turkmenistan55.950.00.00.00.0
Ukraine299.01,123.91,084.92,041.92,986.1
Estonia0.00.00.024.1214.3
(In million of cubic meters)
Natural gas
Total3,450.51,635.52,565.52,341.82,431.8
Georgia0.00.00.0177.00.0
Russia3,450.51,635.52,565.52,164.82,431.8
(In thousands of tons)
Gasoline
Total273.591.7130.0186.5n.a.
Kyrgyz Republic34.736.387.993.4n.a.
Latvia1.00.00.00.0n.a.
Moldova2.00.30.00.0n.a.
Russia0.90.810.511.8n.a.
Tajikistan38.43.513.653.3n.a.
Uzbekistan168.99.312.528.0n.a.
Ukraine27.641.55.50.0n.a.
Diesel fuel
Total324.852.594.7294.3n.a.
Belarus0.80.00.00.0n.a.
Kyrgyz Republic59.429.355.365.6n.a.
Latvia5.20.00.024.6n.a.
Lithuania0.00.01.02.5n.a.
Moldova0.40.00.00.0n.a.
Russia1.62.08.9157.0n.a.
Tajikistan26.97.69.511.8n.a.
Uzbekistan208.46.11.13.7n.a.
Ukraine22.17.517.329.1n.a.
Estonia0.00.01.60.0n.a.
Heavy furnace fuel
Total49.588.7132.6198.5n.a.
Belarus4.03.00.00.0n.a.
Kyrgyz Republic29.621.535.789.6n.a.
Lithuania0.00.00.04.4n.a.
Moldova1.90.00.00.5n.a.
Russia2.13.238.881.0n.a.
Tajikistan10.40.00.00.0n.a.
Uzbekistan1.50.00.00.6n.a.
Ukraine061.058.122.4n.a.
Coking coal
Total4,240.33,373.61,976.01,507.51,371.3
Belarus0.02.00.00.00.0
Georgia46.82.50.00.00.0
Kyrgyz Republic0.091.35.528.65.7
Lithuania0.00.00.01.30.0
Russia3,469.12,460.81,959.41,477.61,365.6
Tajikistan0.00.10.00.00.0
Turkmenistan0.05.50.00.00.0
Uzbekistan0.09.11.20.00.0
Ukraine724.4802.39.90.00.0
Source: Kazakh authorities.
Source: Kazakh authorities.
Table 32.Kazakhstan: Geographical Distribution of Exports 1993-97(In percent)
1994199519961997
1. BRO Countries58.8956.3358.9346.47
Armenia0.030.000.000.00
Azerbaijan1.440.450.170.37
Belarus1.361.160.750.67
Estonia0.110.320.230.67
Georgia0.040.010.160.03
Kyrgyz Republic1.861.471.811.04
Latvia0.450.670.290.32
Lithuania0.422.432.680.71
Moldova0.100.050.050.04
Russia44.4042.2744.4733.88
Tadjikistan0.290.820.990.86
Turkmenistan0.781.030.630.78
Ukraine3.972.443.424.77
Uzbekistan3.643.213.282.33
2. Non-BRO Countries41.1043.6841.0753.54
Austria0.390.310.230.07
Afghanistan11.560.060.090.14
Belgium0.200.300.110.39
China4.625.917.416.95
Czech Republic2.190.540.380.30
Finland0.511.021.792.92
Greece0.090.040.020.04
Germany2.273.432.945.55
Hungary1.520.170.180.08
Italy1.312.873.165.61
Japan0.840.901.401.69
Netherlands7.699.915.193.20
Oman0.820.000.000.01
Poland1.730.760.350.44
South Korea1.861.842.862.04
Switzerland4.033.753.394.49
Sweden0.310.060.310.11
Thailand0.510.800.891.00
Turkey1.521.420.831.61
United Kingdom2.012.253.718.62
United States2.330.900.952.19
Yugoslavia0.020.000.010.00
Other countries-7.236.444.876.09
Total100.00100.00100.00100.00
Source: Kazakh authorities.
Source: Kazakh authorities.
Table 33.Kazakhstan: Geographical Distribution of Imports 1993-97(In percent)
1994199519961997
l. BRO Countries51.4369.9770.6955.40
Armenia0.050.070.010.04
Azerbaijan0.420.660.530.45
Belarus2.302.112.841.37
Estonia0.120.180.210.19
Georgia0.110.060.070.13
Kyrgyz Republic0.960.822.141.30
Latvia0.370.310.290.75
Lithuania0.590.480.630.51
Moldova0.290.150.190.06
Russia39.5249.0554.9745.98
Tadjikistan0.290.320.410.15
Turkmenistan0.216.384.140.76
Ukraine4.302.292.172.18
Uzbekistan1.907.092.091.53
2. Non-BRO Countries48.5730.0529.3344.60
Austria1.411.370.460.85
Canada0.540.210.150.57
China2.510.900.851.09
Cuba0.330.000.580.50
Czech Republic1.060.590.620.74
Finland0.570.831.321.58
Germany10.535.334.648.60
Hungary1.120.570.821.24
India1.200.370.410.46
Italy2.180.790.991.98
Japan1.910.220.420.68
Poland0.840.550.990.96
Switzerland2.341.521.071.16
Sweden0.420.440.260.31
United Kingdom2.382.191.803.31
United States3.921.921.564.72
Yugoslavia0.170.050.060.05
Other countries15.1412.2012.3315.80
Total100.00100.00100.00100.00
Source: Kazakh authorities.
Source: Kazakh authorities.
Table 34.Kazakhstan: Breakdown of Foreign Direct Investment by Country, 1993-97(In percent of total)
Country19971993-97
Canada1.102.99
China15.123.30
Germany2.551.53
Iceland3.161.64
Indonesia6.011.20
Korea34.7917.78
Switzerland1.500.92
Turkey3.116.41
United Kingdom3.881.78
United States10.0634.71
Others18.7227.74
Total100.00100.00
Source: Kazakh authorities.
Source: Kazakh authorities.
Table 35.Kazakhstan: Breakdown of Foreign Direct Investment by Industry, 1993-97(In percent of total)
Sector19971993-97
Oil and gas35.3050.00
Ferrous metals36.8023.34
Non-ferrous metals2.914.05
Energy6.202.75
Geological exploration1.490.37
Mining3.272.07
Food3.413.93
Banking1.251.00
Communication6.113.01
Hotels and restaurants0.540.21
Other2.729.27
Total100.00100.00
Source: Kazakh authorities.
Source: Kazakh authorities.
Table 36.Kazakhstan: External Debt Outstanding, 1993-97
19931994199519961997
(In millions of U.S. dollars)
Multilateral0189375648892
World Bank0189289516716
Import rehabilitation loan0176179179
SAL0090180
FSAL00090
Other0132067
EBRD00223610
ADB006496165
Bilateral1,2741,4131,5611,6091,658
Russia I 1/1,2501,2501,2501,2501,250
Russia II 2/1168686868
Other CIS 3/13888
Japan (JEXIM)087227271
Other00811
Non-CIS credit lines 4/4868341,060881942
Eurobonds000200550
Total external debt (excluding IMF)1,7612,4352,9963,3384,042
IMF credit88281432552545
Total external debt (including IMF)1,8482,7173,4283,8904,587
(In percent of total debt)
Total100.0100.0100.0100.0100.0
Multilaterals (excluding IMF)0.07.010.916.719.4
IMF4.810.312.614.211.9
Bilaterals68.952.045.541.436.1
Of which
Russia68.248.538.433.928.7
Commercial credits26.330.730.922.620.5
Eurobonds0.00.00.05.112.0
(In percent)
Memorandum items:
Debt/GDP (excluding IMF)21.916.915.918.0
Debt/GDP (including IMF)24.520.018.720.4
Debt service/exports (excluding IMF)-1.4-3.2-2.4-4.3-5.4
Debt service/exports (including IMF)-1.4-3.3-2.7-4.6-5.8
Sources: Ministry of Economy; Ministry of Finance; and staff estimates.

Intergovernmental debt (US$ 1,250 million) resulting from conversion of 1992-93 correspondent account balances.

Intergovernmental debt resulting form drawings under the Russian ruble 150 billion technical credit.

Through direct contracts with other CIS (Turkmenistan).

Includes credit lines from Austria, Canada, China, European Union, France, Germany, Israel, Pakistan, Spain, Turkey, and the United Kingdom.

Sources: Ministry of Economy; Ministry of Finance; and staff estimates.

Intergovernmental debt (US$ 1,250 million) resulting from conversion of 1992-93 correspondent account balances.

Intergovernmental debt resulting form drawings under the Russian ruble 150 billion technical credit.

Through direct contracts with other CIS (Turkmenistan).

Includes credit lines from Austria, Canada, China, European Union, France, Germany, Israel, Pakistan, Spain, Turkey, and the United Kingdom.

APPENDIX I Pension Reform in Kazakhstan

I. Introduction

1. In June 1997 the Kazakh authorities enacted a Chilean-style pension reform that transformed the existing public pension system into a funded system from January 1998. The reform, which is the first of its kind in the BRO,1 was precipitated by a crisis of mounting arrears in the collection of payroll contributions and payment of pension benefits. The relatively young demographic profile of the Kazakh population, and the corresponding lack of pressure from demographic factors, makes this an opportune time to undertake structural reform of the pension system.2 The reform will create a system well-suited to provide adequate old age protection in the period after 2010 when the Kazakh population is expected to age.

2. Despite the long-term benefits, the reform is not without costs or risks. In the short and medium term, Kazakhstan will have, simultaneously, to provide benefits for existing pensioners and forgo a substantial portion of the payroll contributions that currently fund these benefits. In addition, the shortfalls in the collections of payroll contributions experienced in early 1998 underscore the need for a quick buildup of the administrative capacity in the government. Proper administrative, regulatory and legal infrastructure is a prerequisite for the credibility of the new system and for the proper functioning of the financial markets needed to handle large volumes of savings from private and public pension funds. This Appendix first reviews the main features of the previous Soviet-style pay-as-you-go pension system and its shortcomings, and then provides an overview of the new system, the difficulties encountered so far, and some of the transition issues.

II. The Main Features of the Pay-As-You-Go System

A. The Existing PAYG Pension System

3. Until the 1998 reform, public pensions were administered by the Pension Fund (PF). Retirement, disability, and survivor’s benefits were provided according to an earnings-related, defined benefit, formulae to about 2.5 million people, or 15.4 percent of the population (Table 37). Three quarters of all retirees were receiving old age pensions and about 7 percent were working pensioners. The retirement programs were financed on a pay-as-you-go (PAYG) basis through payroll taxes on the wage bills of mostly state enterprises and budgetary organizations. Payroll tax rates, which stood at 37 percent of the wage bill in 1993, had been reduced to 25.5 percent by 1997. The PF also distributed nonpension social allowances (primarily for families with children), but was inadequately reimbursed from the budget for the payment of these allowances, resulting in more pressure on its finances. Starting in February 1997, the responsibility for paying these allowances was shifted to the Ministry of Labor and Social Protection.

4. The standard pension age, which was 60 years for men (55 years for women) until 1996, is in the process of being raised by six months every year until it reaches 63 years (58 years for women) by 2002. Covered workers were entitled to a basic monthly pension equal to 60 percent of the final average salary if they had a minimum length of service of 25 years for men (20 years for women). The final average salary was calculated on the basis of the highest consecutive 12-month period of the last 15 years of employment. The maximum pension, which was 10 monthly minimum wages (i.e. ten times the calculation index) before the reforms of July 1996, was raised to 15 minimum wages afterwards. Pensions also had a length of service component, amounting to 1 percent of final average salary for each year of service over 25 years for men (20 years for women). Additional pensions were also provided for special circumstances that included the presence of dependents, military service and special public service.

B. Weaknesses of the PAYG System and the Ineffectiveness of the 1996 Pension Reform

5. The structure of the previous system was distorted by several features. On the benefit side, there were early retirement ages for specific categories of workers and a lack of clear relationship with pre-retirement earnings. As a result of general increases in pensions, retirement benefits rose to an average 37 percent of the national wage (about US$41) in 1997, up from about 29 percent of the national wage in 1993. Although the number of retirees declined by over 8 percent between 1993 and 1997, official employment declined by over 30 percent during the period.3 As a result, old age support ratios have declined. In 1993, there were over 2 contributors for each beneficiary; in 1997 there were fewer than 1.6. No doubt some of this drop represented a shift of workers from officially counted employment to other forms of labor. Nevertheless, it created a serious drain on revenues and has contributed to the financing problems experienced over the past several years. It will also increase the additional resources that must be found to finance the transition to a funded system.

6. On the revenue side, the tax base for payroll contributions had been narrowed due to the structural transformation of the economy and the shift of labor away from the state sector. Although increased compliance from the officially employed would be helpful, a more fundamental problem is to ensure that, as the restructuring of the economy continues, all workers, including those in the private sector, will be brought into the pension system. In 1996, the measured wage bill was roughly one-quarter of GDP. Even allowing for full payroll contributions (i.e., adjusting the 25 percent upward for 32 percent payroll contributions), the measured labor share of GDP was roughly one-third. It is unlikely that this presents an accurate picture of the importance of labor in the economy. Since measured employment was 40 percent higher than the present measured level as recently as 1993, it is quite likely that the true labor share now is much higher than the measured share. Broadening the wage base of payroll contributions is necessary not only to support the current pension system, but also to ensure that all workers participate in the new system.

7. A related problem with the PAYG system was the decentralized collection of payroll contributions and pension payments, which likely reduced compliance even on the measured wage bill. Payroll contributions were collected at the local level. Thirty percent of collections were transferred to the central accounts, and the remaining 70 percent were retained locally to pay benefits. The central funds were redistributed to those oblasts in which local contributions were insufficient to pay local benefits. This system led to inefficient incentives to collect contributions. Higher-income oblasts had little incentive to collect more contributions than were needed, net of transfers to central accounts, to pay local benefits.4 In addition, even with redistributions from the republican level, some oblasts did not have sufficient funds to pay local benefits. This led to a very uneven distribution across oblasts in the accrual of arrears.5

8. An earlier parametric reform of the old-age and survivor’s pension system, enacted during 1996, met with limited success. The 1996 reforms were designed around two main elements. First, the existing PAYG pension system was to be overhauled via: (i) not introducing new special sector-and profession-related benefits, as per the Civil Service Law already introduced; (ii) increasing the retirement age by six months every year starting no later than January 1, 1997 until a retirement age of 63 years for men and 58 years for women is attained in the year 2002; (iii) linking the minimum (social) pension benefit to the “calculation index” in 1996;6 (iv) unifying and raising the contribution rate from 5 percent to 30 percent for lawyers associations, small farmers and the self-employed from 1997 onwards; and (v) reducing pensions for working pensioners, above a specified threshold. Provisions (ii)–(v) were contained in a Pensions Law which was adopted by Parliament in June 1996. The exact amount of the reduction of pensions for working pensioners was to be significant, and was to be determined by end-December 1996. By December 1, 1996, a study of the existing and prospective financial position of the Pension Fund was to be completed to determine whether additional measures would be needed to preserve its financial viability. Second, preparations were to be made during 1996 for introducing private pension funds with voluntary participation. Prudential regulation and supervision of the funds was to be the responsibility of the National Bank of Kazakhstan (NBK) and the Ministry of Labor and Social Protection. The operation of private pension funds was to be allowed beginning in 1997.

9. While the measures adopted with the pension reform of 1996 were a step in the right direction, the financial position of the PF deteriorated significantly in 1995–96. The main reasons for these difficulties were: (i) large increases in real pensions granted by Parliament in mid-1996 that far outstripped wage growth. In 1996, the calculation index was increased 77 percent, while wages increased by about 28 percent; (ii) the buildup of substantial arrears on contributions, including not only by state and private enterprises but also by budgetary organizations;7 (iii) low contribution compliance and lack of coordination among the collection operations of the four social funds and the Tax Service; (iv) the excessively decentralized system of collecting contributions and making pension payments; (v) excessively generous eligibility for benefits; and (vi) a very high system dependency ratio.

C. Pension Arrears and Their Repayment

10. In 1996, the PF ran a surplus of T 3.8 billion, or 0.3 percent of GDP (Table 38), but at the cost of accruing substantial arrears, estimated at T 26 billion at end-1996.8 The situation became critical in 1997 when the PF incurred additional arrears of T 1 billion in the first half and was projected to incur additional deficits of T 9 billion during the second half of the year. Without additional financing for these deficits, the stock of arrears would reach T 36 billion by end-1997. Given the urgency of the situation, the authorities decided to eliminate all pension arrears by end-1997 and to fundamentally restructure the pension system. New measures (described below) and budgetary transfers of T 36 billion (2.1 percent of GDP) enabled the PF to pay during the year current pension liabilities and to repay all pension arrears incurred prior to 1997. Revenue from payroll contributions in 1997 is estimated at T 88 billion (5.1 percent of GDP), while expenditures for current pensions are estimated at T 95.2 billion (5.6 percent of GDP).

11. In order to clear the estimated T 36 billion of pension arrears, the government implemented a combination of revenue-enhancing and expenditure cutting measures and raised the budget deficit ceiling for 1997. The fiscal measures were expected to amount to T 19 billion during July-December 1997, including T 12 billion from additional privatization receipts, while the budget deficit was allowed to rise by T 17 billion, financed by additional foreign financing. Measures were also taken to slow the growth in pension spending in 1997, including: (i) continuation of the gradual increase in the retirement age and reduction in the number of preferential pensions; (ii) the elimination of the option, introduced in 1996, that allowed people to retire at the previous age limits (60 years for men and 55 years for women) at a reduced pension until they reached the new age limits introduced in 1996, at which time they would receive an unreduced pension. In addition, additional emergency measures included (i) freezing benefits in nominal terms until 1998; and (ii) postponing the payment of benefits from the beginning to the end of the month, which provided a one-time “saving” of about T 9 billion.

D. Actuarial Projections in the Absence of a Funded System

12. Despite the savings achieved by the 1996 Pension Law, the financial prospects of the public pension system seemed bleak in the absence of either a parametric reform (that would maintain the PAYG nature of the system but would reduce its generosity) or a more fundamental reform akin to the Chilean model. To assess the prospects of the existing system the government’s Working Group on Pension Reform relied on an actuarial model constructed with technical and financial assistance from USAID and the World Bank. A counterfactual case was considered in which the basic features of the PAYG system would continue, including the 25.5 percent payroll tax rate and accrual of pension rights under the defined benefit PAYG system. The model incorporated detailed demographic and economic assumptions and specific features of the Kazakh public pension system. It was conservatively assumed that real wages would grow at 2 percent per year and that compliance in the collection of contributions would continue to decline until 2001-2002 before beginning to improve. Model projections covering the 1998-2026 period confirmed the unsustainable nature of the unreformed system over the projection horizon. In the absence of reform, the net costs of the existing system (the deficit in the public pension system that would have to be financed by transfers from the budget) would increase slightly from 3.9 percent of GDP in 1997 to 4.0 percent of GDP in 1998, mainly as a result of additional pensioners.9 The annual cost of the unreformed system would then gradually decline to a steady state net cost of 2.1 percent of GDP in 2012–2026. The NPV of the net cost of the existing system (NPV of benefits less NPV of contributions without reform) was calculated at about 66 percent of 1997 GDP (Table 39). Clearly, if the authorities were not going to engage in fundamental reform of the pension system, it would be necessary to adjust the parameters of the PAYG system, including curtailing growth in the replacement rate, and perhaps reducing it.10

III. The Funded System

A. Main Characteristics of the New System

13. The 1997 reform replaced the existing PAYG system with a defined contribution, funded system of individual accumulation accounts coupled with a minimum pension guarantee from the state. After January 1, 1998, workers accrue new pension entitlement exclusively under the mandatory savings plan, possibly supplemented by private savings. A residual public system remains for workers who have accumulated years of service under the old plan.

14. Under the new system, all workers are required to save 10 percent of their wages in an approved retirement account. At the same time, the payroll tax rate for pensions was reduced from 25.5 to 15 percent, and will on present plans be reduced by one percentage point a year over the next 10 years.11 This tax no longer entitle workers to additional pension benefits under the old system but will help, along with budget transfers, to fund public pension liabilities accrued under the PAYG system. New pensions granted under the PAYG system will be proportional to years of service prior to January 1, 1998. In order to improve the collection of wage taxes, responsibility for the collection of payroll taxes for pensions was transferred to the Tax Committee (TC) in 1997 and procedures are being adopted for the assignment of unique personal identification numbers to all persons of working age by the year 2000.

15. Contributions can be invested in public or private accumulation funds chosen by the contributing workers. The government has established a government-run pension fund, the State Accumulation Fund (SAF) to which payroll contributions will be channeled until the private pension funds recently licensed are fully operational. The SAF (akin to the Banco de la Nacion scheme in Argentina) is authorized to invest in securities issued by the government, deposits in state banks, and securities issued by international financial institutions. Assuming a 10 percent contribution rate, the new pension system is expected to generate replacement rates of about 60 percent for workers with long employment histories.

16. Some workers with interrupted employment histories (particularly women) or low incomes, are expected to be unable to accumulate sufficient funds and will be protected by the minimum pension guarantee. This guarantee will be indexed retroactively to actual inflation and was set at T 2,400 per month for 1998 (about 26 percent of the national wage). As part of the reform, disability and survivor’s pensions have been replaced with flat-rate allowances paid through the state budget. This is an interim measure that will be replaced by mid-year 2000 by mandatory disability and survivor’s insurance financed by premia paid by workers to accredited insurance companies.

17. The government has established a regulatory environment that facilitates the operation of a nonstate accumulation funds. The government envisaged that a core group of 4–5 private pension funds should be ready to operate at the early stages of the reform, and to date twelve such funds (including the SAF) have been licensed. Private pension funds will be able to invest in government securities, private bonds, bank deposits, equities and, with restrictions, abroad. In the early years of the reform, it is expected that pension funds will invest mostly in government securities. To facilitate the operation of the funds, the authorities are expanding further the range of maturities of government securities, which were lengthened in 1997 to include 2-year notes. Maturities of treasury securities will be further lengthened by mid-1999. It is planned to list government shares of companies on the Kazakh Stock Exchange, including of high-quality, blue-chip companies. Foreign companies (banks, insurers, asset managers, actuaries, accounting and auditing firms) are providing much needed expertise in fund management, account administration, marketing and systems management.

18. Insurance companies are expected to be established to provide the annuities which are required to convert the defined contribution pension plans into a regular stream of retirement income. Upon retirement, contributors to the system will be entitled to receive a sum equivalent to their accumulated contributions plus accrued interest, dividends and capital gains. With this sum, retirees are expected to shop around to purchase an annuity from the insurance companies.

B. Actuarial Projections for the Residual PAYG System

19. The residual public system, combined with any minimum pension guarantees of the funded system, will continue to exert considerable pressure on the country’s public finances during the next three decades. This is illustrated by simulations of the government’s actuarial model that take into account the prospective aging of the population, real growth in wages and pensions, and the lack of accumulation of any new pension rights under the old PAYG system effective January 1998. The net cost of the residual public system in relation to GDP will decline from 5.7 percent in 1998 to 4 percent in 2013 and 1.9 percent in 2026.

20. There are several reasons why the cost of the residual system remains large. First, despite the natural attrition of existing pensioners from the PAYG system, population growth and population aging when the babyboom generations retire cause the total number of pensioners in the future to rise.12 Second, replacement rates for new pensioners under the PAYG system decline only slowly during the first several years of reform because many new pensioners have long work histories under the PAYG system and qualify for almost full pensions. In the first decade of reform the average replacement rate for new pensioners under the government’s baseline scenario declines from 70 percent in 1997 to 62 percent in 2008. Eventually, however, replacement rates for new pensioners decline faster in the outer years of reform, from 41 percent in 2018 to 19 percent in 2026, as new pensioners entering the remnant system have fewer years of eligibility.

C. Fiscal Impact of the Reform and Fiscal Sustainability

21. Pension reform will place a substantial strain on the budget for many years. From the perspective of the budget, in the short run pension reform is simply a reduction in the contribution rate to the PAYG system. It will take many years for the level of public pension benefits to fall substantially, since the public system will be the primary source of pensions for retirees over the next decade and more. When benefits do fall, however, the pressure on the budget will ease, and the full benefits of prefunding will be realized. To finance the cost of transition, government borrowing from individual accounts will be allowed up to one-half of the accumulation.

22. Under reasonably conservative assumptions, simulations of the government’s actuarial model suggest that, in the near term, pension reform will raise the general government deficit by about 1.7 percent of GDP.13 The cost of the reform is mainly due to the reduction in the payroll tax rate from 25.5 percent in 1997 to 15 percent in 1998. To cover these costs, the 1998 budget provides an allocation of T 52.5 billion (2.7 percent of GDP) for the payment of existing pensions. Beyond 1998, the net cost of the reform rises gradually during the first decade of reform and reaches 2.8 percent of GDP in the year 2008 before commencing a gradual decline to zero in 2025. The steady rise in the cost of reform during 1998-2008 is primarily due to the further reduction until 2008 in the payroll tax rate by one percent per annum to a level of 5 percent. Thereafter, the payroll tax is assumed to remain constant at 5 percent. The net present value of the stream of deficits due to the pension reform, a summary measure of the aggregate cost of transition, is about T 622 billion (measured in 1997 tenge) or about 36.5 percent of 1997 GDP. The simulations are, of course, sensitive to the underlying assumptions.

D. Macroeconomic, Financial and Social Implications of the Reform

23. The above discussion abstracts from the possible macroeconomic benefits of a switch to a fully funded pension system. Economists and public policy analysts have paid considerable attention in recent years to the question of whether a funded pension scheme is superior to a pay-as-you-go system. The proponents of a funded system argue that it would address some of the problems faced by the Kazakh and other public pension systems—most notably low compliance and labor market distortion among the working population and income insecurity for pensioners—and, at the same time, enhance national saving and economic growth. The latter claim is the more controversial: it implies that a switch to a funded pension system can enhance economic growth, and therefore can represent more than just a shift in welfare among generations.14

24. Not surprisingly, the evidence of the effect of pension reform on saving and growth—both theoretical and empirical—is ambiguous. As a matter of principle, it is easy to show that the introduction of a funded social security scheme leaves aggregate savings unaffected relative to the status quo of having no retirement scheme, if the forced contribution rates are not too high. The introduction of PAYG schemes is generally assumed to lower aggregate savings relative to the status quo.15 It would follow that the winding down of a PAYG system would increase aggregate saving in the long run, once the transition has worked itself out.

25. Whether national savings rises or falls during the transition depends critically on the underlying stance of fiscal policies. With the underlying deficit unchanged, a switch to a funded system results in a budget deficit, since payroll contributions to the PAYG system have stopped while accumulated pension liabilities must be paid. The additional government borrowing is matched by higher private savings, so national savings would be unchanged if interest rates are not affected. However, if the interest rate earned under a funded scheme is higher than the rate of growth of the nominal wage bill (the rate of return under PAYG), there is an income effect which would tend to discourage savings. In this case, it is not possible to roll over the government debt forever, so at some point additional fiscal consolidation would be in order. The Kazakh authorities have pursued a phased reduction of the implicit debt of the PAYG system in order to distribute the cost of the transition over current and future generations of workers. This implies that the fiscal costs of transition are financed by some borrowing, accompanied by some fiscal consolidation. Kazakh workers during the transition would face taxes to pay for existing pensions and contribute to their own retirement accounts. The fiscal consolidation would increase national savings during the transition, but this is not an unavoidable byproduct of the pension reform itself According to research cited in Mackenzie et al., the increase in national savings reported in the aftermath of the pension reform in Chile was indeed facilitated by the consolidation of the public finances.

26. The considerable uncertainties of making projections over long periods of time suggest that it is very important for the authorities to maintain flexibility during the transition period. If the costs of transition are trending higher than expected, the authorities will need to adjust by either changing the time path of contribution rates, improving revenue collection performance under existing rates, or adjusting benefits. The authorities have proposed reducing the payroll contribution rate for pensions to 15 percent in 1998, and subsequently reducing it one percentage point a year for another 10 years. The new law on pension provision is silent on these details, however, so the authorities have the discretion to adjust the plan. Likewise, the returns achieved on individual accounts will have to be carefully monitored to see whether they can produce adequate replacement rates.

27. As regards the social implications of reform, a crucial question regarding the new system is whether individual retirement accounts will provide sufficient retirement income under reasonable assumptions regarding length of working lifetime and real rates of return. Individual retirement accounts will require a high rate of return on investment to yield benefits similar to the public pension system. Under the pension reform, an individual’s initial pension replaces 60 percent of her or his recent wages, and is subsequently indexed for inflation. After the new pension ages are phased in, an individual will qualify for this pension if she (he) has worked for at least 20 years (25 years) and has reached age 58 years (63 years). Taking this as an implied definition of adequacy, what kind of investment returns would be necessary to yield similar performance for funded pensions? Table 40 presents the required real rates of return for a combination of replacement rates and pension ages, assuming a 10 percent contribution rate.16

28. For a 60 percent replacement at the age of 60 years, after working for 38 years, the real rates of return an individual would have to earn throughout his/her working and retirement years—after deducting transactions costs—would be 6.2 percent. To put this into perspective, consider two facts: (i) the average rate of return on the New York Stock Exchange over long periods is roughly 6 percent per year; and (ii) under the public pension system, a woman would have been eligible for a 70 percent replacement rate 2 years earlier. The required real rate of return for a 70 percent replacement rate at the age of 58 years after 20 years of service would be over 12 percent.

29. Another challenge that must be met in the course of pension reform is to develop the depth and diversity of investment opportunities necessary to achieve a sufficiently high and safe rate of return. To make the new individual accounts work, it will be necessary to develop remunerative investment opportunities to build up retirement savings and carefully designed procedures for drawing these savings down. It is unclear whether the authorities intend that the individual accounts be invested domestically, or whether international diversification will be allowed. In any event, it is safe to assume that likely investment returns will be reduced or risk will be increased until domestic capital markets become more developed. Individuals will also need access to sophisticated financial products, such as annuities and life insurance, in order to protect themselves against the risks of a defined-contribution pension system.

30. It is clear from Table 40 that the rates of return that people will have to earn on their individual accounts to receive pensions as generous as those promised under the public system are very high. The authorities would need to carefully compare the likely benefits under the two systems in setting the parameters of both. A reduction in the generosity of the public system would reduce the transition costs. On the other hand, since individual accounts are the pension system of the future, it is important not to raise expectations artificially about the level of pensions that this system will support. It will probably be necessary to raise contribution levels, especially prior to the maturation of domestic capital markets, in order to achieve replacement rates that approach those under the public system.

31. The new pension law does not set conditions for making withdrawals from individual accounts. Since these accounts are to be the primary source of income in old age, these rules must be carefully structured. Annuities, once they become available, are an important option for withdrawals that eliminate individual risk with respect to longevity. Any other options would have to ensure sufficient resources to cover an unexpectedly long life. These issues must also be addressed to ensure that individuals do not fall back into the social pension system at some point.

E. Administrative Issues

32. Despite the progress made by the authorities with the preparations of the reform, substantial technical difficulties were experienced in connection with the implementation of the new system in early 1998. Among the administrative achievements were: (i) the establishment of the new agencies needed to operate the new system, including the National Pension Agency (NPA), the State Center for the Payment of Pensions (SCPP), and the State Accumulation Fund (SAF); (ii) the promulgation of laws and regulations; and (iii) the licensing of eleven private pension funds, three asset management companies, and five custodial banks.

33. The NPA has been created under the Ministry of Labor and Social Protection (MLSP) as the regulatory authority for non-state pension plans. The National Securities Commission (NSC) and the National Bank of Kazakhstan (NBK) also have regulatory authority for asset management companies and custodial banks. The State Center for the Payment of Pensions (SCPP) has been created to take over the responsibility for paying pensions under the residual state pension and to allocate workers’ contributions (collected by the Tax Committee) to the state and non-state accumulation funds in an efficient and timely manner. The SAF is available to hold and invest the defined contributions until individuals have the opportunity to open personal saving schemes.

34. Regulations have also been issued governing the operation of the SAF, nonstate accumulation funds, asset management companies, and custodial banks. These regulations include standards for licensing and license fees, commission structure, reporting and disclosure requirements and standards, accounting and auditing, methods of transferring assets among funds, prudential norms, minimum capital requirements, and portfolio norms. The law and regulations issued by the authorities define minimum capital requirements and regulate commissions while preserving the potential profitability of pension fund management companies. They also cover authorization criteria, “fit and proper” tests for founders and managers, detailed business plans, asset segregation, external custody, audits, actuarial reviews, sound investment policies, professional asset management practices, proper valuation and return calculation methods. In addition, they also specify adequate information disclosure, sensible marketing and advertising policies, effective supervision, workable compliance rules and sanctions, favorable tax treatment, and features of pension plans. Custodial services are to be assigned only to commercial banks of the highest caliber or to the NBK.

35. The numerous implementation difficulties faced by the authorities in the early months of the operation of the funded system were mainly due to the ambitious timetable set by the authorities rather than fundamental flaws in the reform policy framework. The problems encountered included: (i) low collections under the funded scheme; (ii) lack of assignment of unique Personal Identification Numbers (PINs) for most of the individual contributors; (iii) delays in the installation of computer hardware and software in the SCPP; (iv) delays in the establishment of actuarial capacity within the government; and (v) delays in the establishment of an adequate contractual regime governing the relations of pension funds, asset management companies, and custodial banks.

36. Following significant shortfalls in February and March, collection of payroll taxes and of payroll contributions picked up significantly in April and May after the authorities made a determined effort to get the reform back on track. Specifically, efforts were made to unblock the financial flows of the new system, which had been blocked in early weeks owing to employer errors in the submission of the contributions and the lack of the assignment of PINs. The assignment of unidentified contributions by the SCPP is now proceeding well, employer errors in the submission of the contributions to the funded system have declined, and the functioning of the SCPP is improving. In view of the need to avoid the reemergence of pension arrears, the authorities increased the levels of budgetary transfers relative to the monthly amounts stipulated in the budget in the early months of the year. It is expected that collections of payroll taxes will increase in the coming months, soon eliminating the need for additional budget transfers.

37. As of May 1998, the introduction to PINs continued to be delayed, owing to difficulties with computer hardware and software at the SCPP. The authorities are, however, making a determined effort to solve the remaining problems, and expect to be able to assign PINs to one quarter of all current contributors by mid-June and to all current contributors by end-September 1998.

Table 37.Kazakhstan: Pensions and Allowances Paid, 1993-97
19931994199519961997
Estimated
(Number of recipients, thousands of persons)
All pensioners2,7592,5722,6942,5312,534
Working pensions251204236225175
Labor pensions2,5672,4162,432
Age pensions1,9931,8511,908
Other labor pensions574565524
Social pensions11310397
Military disability pensions13115
(Average monthly amount in Tenge)
All pensioners375171,4002,3253,131
Working pensions285241,3872,3373,467
Labor pensions1,4412,3853,217
Age pensions1,5002,4563,273
Other labor pensions1,2362,1543,014
Social pensions5099621,341
Military disability pensions1,0501,7322,937
(Index of real average benefits 1995 = 100)
All pensioners145102100119134
Working pensions110104100121149
Labor pensions100119133
Age pensions100118130
Other labor pensions100125145
Social pensions100136157
Military disability pensions100119166
(Average pension in percent of average wage)
All pensioners2930283439
Working pensions2231283443
Labor pensions293540
Age pensions303640
Other labor pensions253237
Social pensions101417
Military disability pensions212636
Sources: Ministries of Finance and Labor and Social Protection; and Fund staff estimates.
Sources: Ministries of Finance and Labor and Social Protection; and Fund staff estimates.
Table 38.Kazakhstan: Pension Fund Accounts, 1995-97(In billions of Tenge)
199519961997 1/
Estimated
Revenues58.179.8125.8
Contributions from employers51.071.587.7
Contributions from self-employed0.00.0-
Compensation for special benefits0.10.20.2
Local budget receipts5.35.9-
Repayments of contribution arrears--1.0
Transfers from the budget for arrears clearance--36.0
Net cash flow from Savings Bank0.81.50.9
Other receipts0.90.50.0
Expenditures57.275.9124.3
Pensions45.370.6121.1
Old-age and social pensions3.267.394.5
Special pensions2.13.30.7
Clearing of arrears--25.9
Allowances7.79.22.2
Families with children5.57.11.2
Other2.22.11.0
Subsidies to enterprises0.90.8-
Net intergovernmental transfers2.4-5.8-
Other expenditures0.91.01.0
Balance1.03.81.5
(as a percent of GDP)(0.1)(0.3)(0.0)
Balance adjusted for Savings Bank flows 2/0.12.30.6
(as a percent of GDP)(0.0)(0.2)(0.0)
Memorandum items:
Average monthly wage4,9886,7928,477
Average monthly pension1,4462,1113,131
Official wage bill (billions)299361381
Employment (thousands)4,9944,4323,912
Number of nonworking pensioners (thousands)2,4572,3062,359
Working pensioners236225175
Average pension/average wage (percent)29.031.136.9
Social insurance cont/official wage bill (percent)17.119.823.0
Social insurance contributions/GDP (percent)5.05.15.1
Official wage bill/GDP (percent)29.325.522.3
Sources: Ministries of Finance and Labor and Social Protection; and Fund staff estimates.

Estimates made on the basis of data for 9 months.

The adjustment to the deficit understates the increase in net borrowing because some of the payments to the bank during the year were interest payments.

Sources: Ministries of Finance and Labor and Social Protection; and Fund staff estimates.

Estimates made on the basis of data for 9 months.

The adjustment to the deficit understates the increase in net borrowing because some of the payments to the bank during the year were interest payments.

Table 39.Kazakhstan: Fiscal Costs of Pension Reform, 1997-2026(In billions of 1997 Tenge)
199719981999200020012002200320042005200620072008200920102011
A. Net cost without reform667074767869686766666564636566
B. Net cost to Government, Government baseline (=B1+B2-B3)66100106110114108110113116120124128129131132
B1 Total pensions and social allowances following reform114118120121122115115117118120122124125127128
B2 Government contributions to accumulation funds01112121313141415151616171718
B3 Payroll raxes net of Governmnent transfers to SCPP482826242120191816151412131314
C. Revised net cost of system, World Bank estimate (=B+C1+C2+C3)66100104108112106108111115119124128129130131
CI Impact of elimination of category 3 disability011112233444557
C2 Impact of faster real wage growth0-1-1-2-2-2-2-102357911
C3 Impact of lower replacement ratios0-1-1-2-2-2-3-4-5-6-8-10-13-16-19
D. Net cost of reform (=C-B)02930323336394449535964656565
E. Memorandum items:
Net cost of reform (in percent of GDP)0.01.71.71.71.71.81.92.02.12.12.32.42.32.32.2
Net cost without reform (in percent of GDP)3.94.04.04.03.93.33.12.92.82.72.52.42.32.22.2
Revised net cost of system, World Bank esttmate(in percent of GDP)3.95.75.75.65.65.04.94.84.84.84.84.84.64.54.3
Real GDP (billions of 1997 Tenge)1,7091,7601,8311,9222,0182,1192,2042,2922,3842,4792,5782,6822,7892,9003,016
Real GDP growth rate (percent per annum)3.04.05.05.05.04.04.04.04.04.04.04.04.04.0
Payroll tax rate (percent)25.515141312111098765555
Compliance rate (percent)484644434141424242434445464748
NPV of cost of reform (billions of 1997 Tenge)622
NPV of cost of reform (percent of 1997 GDP)36
NPV of net cost without reform (billions of 1997 Tenge)1,131
NPV of net cost without reform (percent of 1997 GDP)66
NPV of revised net cost of the system (billions of 1997 Tenge)1,753
NPV of revised net cost of the system (percent of 1997 GDP)103
Sources: World Bank; Government Pension Model; and Fund staff calculations.
Sources: World Bank; Government Pension Model; and Fund staff calculations.
Table 39.Kazakhstan: Fiscal Costs of Pension Reform, 1997-2026(In billions of 1997 Tenge)
201220132014201520162017201820192020202120222023202420252026
A. Net cost without reform656871737680838689929698101105113
B. Net cost to Government, Government baseline (=B1+B2-B3)132133134134135135135134134133131129127125125
B1 Total pensions and social allowances following reform128129130130130130130129127126123121118115113
B2 Government contributions to accumulation funds181919202122232324252727293031
B3 Payroll raxes net of Governmnent transfers to SCPP141515161617171718181919192020
C. Revised net cost of system, World Bank estimate (=B+C1+C2+C3)130131