Increased burden on regions for debt settlement obligations
As of March 15, 2025, Kazakhstan has implemented significant debt management reforms at the regional level, focusing on institutional and structural changes. These reforms, which include the adoption of new budget and tax codes, tighter fiscal rules, and enhanced redistribution of budgetary funds, aim to strengthen fiscal consolidation and improve the efficiency of debt management.
The reforms introduce new budget and tax codes designed to optimize fiscal policies that affect revenues and expenditures at both national and regional levels. Tighter fiscal rules have been enforced to constrain borrowing and debt accumulation, ensuring sustainable public finances. The responsibilities of local executive bodies have been clarified, aligning them with national fiscal consolidation goals.
The reforms also improve mechanisms for the redistribution of budgetary funds from the central government to regions. This prioritizes efficiency, accountability, and supporting local economic diversification efforts. Excess tax and non-tax revenues from lower-level budgets will be channeled quarterly towards repaying debt obligations and funding priority social expenditures in higher-level local budgets.
These changes are intended to enable regional authorities to manage public debt more prudently within tighter fiscal frameworks. This contributes to Kazakhstan's goal of reducing the budget deficit and maintaining substantial liquid asset buffers. The reforms also support broader economic diversification and public administration improvements, as highlighted by S&P Global Ratings in its positive revision of Kazakhstan’s credit outlook in 2025.
However, some local executive bodies have not adhered to borrowing limits, not exceeding 10% of revenues. The Supreme Audit Chamber has tasked the Ministry of National Economy to address these gaps by introducing changes to the normative-legal framework. Direct responsibility for violating borrowing limits lies with the akims (governors) of regions, cities of republican significance, and the capital.
The reforms are part of Kazakhstan’s ongoing institutional strengthening, including better public financial management at local levels, which is crucial given the increasing focus on fiscal consolidation and economic stability. The Ministry of National Economy has carried out work to address issues identified during a state audit, such as the fragmentation of debt management and the inclusion of expenses on servicing local executive bodies' debt in general-purpose transfers.
In summary, the March 2025 debt management reforms in Kazakhstan centralize and tighten fiscal discipline regionally, clarify and enhance the debt management duties of local executive bodies, and improve budget funds allocation to optimize regional fiscal sustainability and economic growth. These reforms help the country maintain fiscal health amid economic diversification and challenges in the external environment.
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