Financing the Future: The World Bank Urges Kazakhstan to Increase Fiscal Revenues for Sustainable Development, DKnews.kz reports.
Kazakhstan needs to increase its fiscal revenues to ensure long-term investments and sustainable economic growth. This is highlighted in the latest World Bank report, "Financing the Future: Increasing Revenues for Long-Term Investments." According to experts, Kazakhstan's economy is expected to grow by 4.5–5.0% in 2025, driven by increased oil production and continued fiscal support.
Economic Outlook: Growth with Inflation Risks
The report projects a gradual decline in inflation to 7.5–8% in 2025 and further down to 6% in 2026. However, currency volatility and the continuation of expansionary fiscal policies may keep inflationary pressures above the target level. The primary driver of economic growth remains the oil sector, but risks related to oil price fluctuations and weaker global demand could negatively impact forecasts.
"Kazakhstan’s fiscal policy remains expansionary, with a high budget deficit projected for 2025–2026. While the country’s public debt remains manageable, growing reliance on domestic borrowing and withdrawals from the National Fund raises concerns about the Fund’s long-term sustainability. In this report, we emphasize the importance of fiscal discipline and revenue diversification to address these challenges" Andrei Mikhnev, the World Bank’s Resident Representative in Kazakhstan
Fiscal Policy: Rising Expenditures and Sustainability Challenges
The World Bank highlights several key fiscal risks facing Kazakhstan. Government expenditures remain high, while infrastructure modernization and improved public services require increased budget revenues.
The main risks outlined in the report include:
- A potential decline in global oil demand and prices, which could reduce budget revenues.
- Continued fiscal expansion, which could weaken fiscal discipline and increase debt risks.
- The growing impact of climate change, affecting infrastructure and economic activity.
Tax Reforms: The Need for Higher Revenues
The World Bank’s research indicates that Kazakhstan’s tax revenues significantly lag behind those of comparable countries. This limits the government’s ability to fund essential services such as healthcare, education, and infrastructure projects. To address this, the report proposes a comprehensive tax reform program, including:
- Transitioning to a progressive income tax system, ensuring a fairer tax burden distribution.
- Gradual elimination of inefficient tax exemptions, which currently reduce state revenues with little economic benefit.
- Reforming VAT (Value-Added Tax) administration to improve efficiency and collection rates.
- Aligning excise taxes with environmental goals, particularly by increasing taxes on polluting fuels and emissions.
- Enhancing tax administration, reducing the shadow economy, and improving tax collection.
Infrastructure: A Key Priority for Investment
Kazakhstan’s current infrastructure deficit requires substantial public investment. Aging transport networks, issues in housing and utilities, and outdated energy systems are limiting economic potential and reducing the quality of life for citizens. The report highlights that significant budget resources must be allocated to modernize infrastructure.
However, the financing for these projects must come from increased tax revenues rather than excessive borrowing or unsustainable withdrawals from the National Fund. If Kazakhstan continues relying on the Fund for budget deficits, macroeconomic stability could be jeopardized in the long run.
Conclusion: The Need for Structural Reforms
The World Bank's report provides clear recommendations for ensuring economic and fiscal stability in Kazakhstan:
- Strengthening tax administration and combating tax evasion.
- Optimizing the tax system while maintaining social fairness.
- Diversifying revenue sources and reducing reliance on oil.
- Enhancing expenditure control and increasing budget efficiency.
- Limiting the use of National Fund assets for budgetary needs.
If Kazakhstan successfully implements these reforms, the country will not only sustain macroeconomic stability but also create a foundation for long-term economic growth and fiscal resilience.
