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This week, Kazakhstan’s President Kassym-Jomart Tokayev shuffled his authorities. Moreover new Prime Minister Olzhas Bektenov, notable new appointments included Finance Minister Madi Takiyev, and Nationwide Financial system Minister Nurlan Baybazarov. The recent faces within the financial bloc come as Tokayev pledges to pursue a new financial course, together with guarantees to cut back the state’s outsized position within the economic system, increase native manufacturing, and create a extra environment friendly, market-led surroundings.
Tokayev’s financial reform agenda has already begun to take form this yr with a string of recent insurance policies rolled out in current months, together with plans to raise state subsidies on fuel, utilities, and a few meals merchandise, develop new infrastructure, and introduce a brand new, extra environment friendly Tax Code. This month, Kazakhstan’s nationwide airline, Air Astana, can be set to listing on the London Inventory Alternate, ending an nearly decade-long “will it, gained’t it” story because the authorities first mooted floating its flagship provider in 2016.
Astana’s motivation to reform the economic system is obvious. Final yr, bulging state spending and a lower-than-expected tax take meant Kazakhstan registered a finances deficit of $6.2 billion, or 3.7 p.c of GDP, on par with the deficit reported in 2020 on the peak of COVID-19 pandemic. Whereas the economic system has expanded in recent times, efficiency has been lackluster in comparison with the heady progress days of the early 2000s. As soon as a darling of overseas oil and fuel buyers, Kazakhstan has lengthy since didn’t get any main new initiatives off the bottom. Final yr, the long-awaited enlargement of the Tengiz oil discipline, the Tengiz Future Development Mission, was delayed once more, prompting the IMF to downgrade its forecast for Kazakh GDP progress in 2024 from 4.2 to three.1 p.c.
In some ways, the failures of Tokayev’s administration to get the economic system shifting in recent times will be put all the way down to unfavorable political circumstances. The mud of the widespread protests that rocked Kazakhstan in January 2022 is just simply starting to settle, and Tokayev has been busy overseeing a lustration of kinds, pushing out loyalists of former President Nursultan Nazarbayev in favor of a brand new political and financial elite. Furthermore, Russia’s struggle in Ukraine has introduced a severe risk to Kazakhstan’s financial stability. Roughly 80 p.c of Kazakh crude exports cross by means of Russian territory through the Caspian Pipeline Consortium (CPC) – which, already interrupted on doubtful political grounds in 2022, has its terminal simply west of Russia’s Novorossiysk port, unnervingly near Ukrainian forays towards Russian warships within the space in current months.
However, with the home political tensions that adopted the January 2022 protests largely subsiding and the understanding that the struggle between Russia and Ukraine is right here to remain, Tokayev seems to be refocusing his consideration on financial reform. Tokayev’s State of the Nation deal with in September final yr was devoted solely to financial coverage and laid out prudent measures to lower the state’s share within the economic system and increase progress. These included convincing banks to lend extra to the personal sector, streamlining ministries, and maximizing Kazakhstan’s potential in promising sectors, resembling renewables.
All of those are broadly wise insurance policies; the proof might be within the pudding. Not one of the measures set out by Tokayev are new, and Kazakhstan has usually tried and didn’t implement them previously. Kazakhstan’s failure to remain the course is usually because of the adversarial short-term penalties that such reforms entail. Lifting subsidies will increase dwelling prices for the inhabitants, and decreasing the state’s share within the economic system pushes up unemployment – elements that foster public dissatisfaction and immediate the federal government to backtrack on reforms. For instance, it was the state’s efforts to raise worth caps on LPG that offered the catalyst for the January 2022 protests within the first place – worth controls that have been shortly reinstated because the unrest grew.
Because the instant fallout of the home and geopolitical turbulence of the final two years abates, the Tokayev administration is lastly capable of transfer out of disaster administration mode and return to its financial agenda. Whereas the route of journey is constructive, the true problem might be seeing the reforms by means of. A decent socioeconomic local weather and danger of public protest might simply see the federal government backtrack and much-needed reforms fall by the wayside.
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