Regions and Countries

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p. 9 of 47 BACK | NEXT Developing Asia and the Pacific The global economy Newly industrialized economies Central Asian republics, Azerbaijan and Mongolia Kazakhstan Kyrgyz Republic Tajikistan Turkmenistan Uzbekistan Azerbaijan Mongolia People’s Republic of China Southeast Asia South Asia The Pacific

Kazakhstan

Economic performance

Economic growth: During the second half of 1999, the economy began to recover from the recession induced by soft international commodity markets and the 1998 economic crisis in Russia, with GDP increasing by 9.6 percent in 2000, compared with 2.7 percent in 1999. Two external factors contributed to this surge in growth: rising world prices for oil and metals—Kazakhstan’s major exports—and economic recovery in Russia. Industry sector output grew by 14.6 percent in 2000, mainly because of sharp increases in production of oil and metals. However, agriculture sector output contracted in 2000, as grain production shrank because of unfavorable weather.

Employment: Because economic growth in 2000 was mainly driven by growth in the oil and metals subsectors, employment did not improve significantly. While the official unemployment rate for October 2000 was 3.8 percent, slightly lower than 3.9 percent for December 1999, actual unemployment was much higher because some workers officially classified as employed were on mandatory, unpaid leave, and many other unemployed people were not officially registered as unemployed.

Inflation: Consumer price inflation in 2000 subsided to 9.8 percent, much lower than the inflation rate of 17.8 percent in 1999. Increased productivity, an improved fiscal position, and a stable national currency were the main contributing factors. The tenge (T), which depreciated sharply against the US dollar after the authorities floated it in April 1999, remained relatively stable in 2000, fluctuating within a range of T138–T145 to the US dollar.

Fiscal balance: The Government’s fiscal position continued to improve in 2000, helped by strong economic growth, increased oil revenues, and strengthened tax collection and public expenditure management. For the first year since independence, Kazakhstan recorded a state budget surplus, albeit at a relatively low level of 0.1 percent of GDP. To reduce volatility in its budgetary revenues, which are highly dependent on oil exports, the Government will establish an offshore state oil fund for maintaining stable resource flows to the budget and preserving national wealth generated from oil.

External sector: The country’s balance of payments improved in 2000, achieving a surplus of 3.8 percent of GDP, compared with a deficit of 1.1 percent of GDP in 1999. Foreign direct investment (FDI) remained at $1.6 billion in 2000. Kazakhstan issued its fourth Eurobond, for a total of $350 million in April 2000. Strong export growth, renewed inflows of FDI, and issuance of the Eurobond helped strengthen the country’s international reserve position, with gross international reserves rising to $2.1 billion (equivalent to 5.0 months of imports) by the end of 2000. External public debt decreased from $4.1 billion (33.4 percent of GDP) at the end of 1999 to $3.8 billion (32.5 percent of GDP) at the end of 2000, mainly because of debt prepayment to the International Monetary Fund.

Domestic policies: Maintaining stability, fostering growth, implementing structural reforms, and reducing poverty were the major issues on the Government’s policy agenda in 2000. The Government maintained a tight fiscal policy, emphasizing improved revenue collection and better expenditure management. Discussions began in Parliament on a new tax code.

In 2000, the central bank pursued an expansive monetary policy for stimulating growth. It reduced the refinancing rate to 14 percent in 2000 from 18 percent in 1999, and lowered the required reserve ratio for commercial banks from 10 percent to 8 percent on demand and short-term time deposits. Reforms for strengthening the financial sector were also undertaken in 2000: including amending the Law on Banks and Banking to bring the country’s financial system more in line with international banking standards.

As for trade policy, the Government converted all specific tariffs into ad valorem equivalents (except for tariffs on alcohol) to strengthen duty collections. The crude oil export quota was abolished. The Government also submitted a fresh application for membership to the World Trade Organization.

ADB operations

Operational strategy: Against the background of reducing poverty, ADB’s operational strategy for Kazakhstan encourages the transition to a market-based economy by supporting the Government’s reform agenda, institutional change, and social protection; promotes environmental rehabilitation; strengthens the long-term growth potential; and encourages the creation of a new output structure and production capacity through private sector investment. ADB assistance is directed at six priority areas: (i) strengthened reform management at the central and local government levels; (ii) infrastructure, especially rehabilitation projects; (iii) education and training; (iv) industry, focusing on the problems of reforming medium enterprises; (v) agriculture; and (vi) private sector development, where potential projects have been identified in the financial, agribusiness, and energy sectors. A new country strategy and program will be formulated in 2001 to reflect ADB’s and the Government’s priority of fighting poverty.

Policy dialogue: Policy dialogue with the Government in 2000 centered on poverty reduction, public investment programming, and agricultural reform. ADB assistance on developing the medium-term poverty reduction strategy will help guide Kazakhstan’s medium- to long-term socioeconomic development programs. Efficiency in the use of scarce public resources will be enhanced by improvements in preparing, monitoring, and evaluating public investment programs. In the agriculture sector, policy dialogue focused on strengthening the country’s policy, legal, and regulatory frameworks, with the objective of creating an enabling environment for implementing farm restructuring.

Loans and technical assistance: In 2000, ADB approved three loans totaling $110 million: Almaty-Bishkek Regional Road Rehabilitation (Kazakhstan component), Farm Restructuring Sector Development Program (policy loan), and Farm Restructuring Sector Development Program (investment loan). ADB also approved six technical assistance grants totaling $3.6 million.

Project implementation: Since joining ADB in 1994, Kazakhstan has received 13 loans, of which 9 were active at the end of 2000. Contract awards totaled $13.6 million, bringing the cumulative figure to about $346 million. The contract award ratio was 10.2 percent, lower than the ADB-wide average of 21 percent. Disbursements during the year totaled $28.1 million, bringing cumulative disbursements to $340.2 million. The disbursement ratio was 28.2 percent, higher than the ADB-wide average of 20.5 percent.

The Government and ADB made strong efforts in 2000 to improve project implementation: counterpart funds for ADB-financed projects were provided largely on time; the institutional structure for project administration was strengthened, with more project implementation unit staff being recruited; and the executing agencies made progress in complying with loan covenants and financial management procedures. With the assistance of the Kazakhstan Resident Mission, further improvements in project implementation are expected. The relocation of the Kazakhstan Resident Mission to Astana strengthened ADB’s ties with the Government and enabled ADB to better understand the country’s development priorities and constraints, and respond effectively to its requests for ADB assistance.

   

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