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Annual Report 2001

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Kazakhstan

Economic performance

GDP growth was 13.5% in 2001. However, the economy, with its high reliance on oil exports, remains vulnerable to external factors. The surge in oil subsector output and growing export volumes have enabled the economy to expand at its fastest pace since independence. Industry sector output grew by 13.5% in 2001, mainly spurred by the recovery of global prices and sharp increases in oil and gas production. Agriculture sector output grew by 16.9%. Economic growth slowed in the last quarter of 2001 because of decreased global economic activity, a significant softening of world oil prices, and uncertainty following the 11 September events. In 2001, government revenues continued to increase, reaching 24.2% of GDP, largely due to high oil prices, increased pipeline capacity, and large investment inflows. Government expenditures increased sharply to 24.7% of GDP over the same period. The bulk of the increased revenues were spent on state benefits and public sector salaries. Inflation by the end of 2001 was 6.4%, compared with 9.8% in 2000. Lower than expected oil export prices during the fourth quarter of 2001 and higher import costs reduced the size of the trade surplus, which reached 3.9% of GDP in 2001 (shrinking by 29% compared with 2000). Exports decreased by 3.5% while imports increased sharply by 23.5%, mostly due to rising capital goods imports. As a result, the balance-of-payments situation in 2001 was adversely affected, with the current account recording a deficit equivalent to 4.6% of GDP. The heavy presence of multinational oil companies in Kazakhstan ensured sufficient and steady inflows of foreign direct investment to cover the current account deficit. Strong economic growth in 2001 helped reduce unemployment. The official unemployment rate by the end of 2001 was 2.8%. However, the actual unemployment rate was estimated at 10.4% in September 2001, down from 12.8% in 2000.

ADB operations

Operational strategy: ADB’s strategy encourages the transition from a centrally planned to a market-based economy by supporting the Government’s reform agenda, institutional change, and social protection. It also seeks to promote environmental rehabilitation; strengthen long-term growth potential; and encourage the creation of a new output structure and production capacity through private sector investment. ADB assists six priority areas: management reform at the central and local government levels; infrastructure, especially rehabilitation projects; education and training; industry, focusing on reforming medium enterprises; agriculture; and private sector development, where potential projects have been identified in the financial, agribusiness, and energy sectors.

Policy dialogue: Policy dialogue with the Government in 2001 centered on poverty reduction, public investment programming, agricultural reform, and small business development. 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 to create an enabling environment for implementing farm restructuring.

Loans and technical assistance: No loans were approved in 2001. ADB approved five technical assistance grants totaling $2.3 million, of which two were to prepare projects on urban small business development, and early childhood and women’s development. Three advisory grants were approved.

Project implementation: Since joining ADB in 1994, Kazakhstan has received 13 loans, of which 9 were active at the end of 2001. Contract awards totaled $8.2 million, bringing the cumulative figure to about $358.0 million. The contract award ratio was 7.0%, lower than the ADB-wide average of 14.8%. Disbursements during the year totaled $15.3 million, bringing cumulative disbursements to $355.5 million. The disbursement ratio was 25.3%, higher than the ADB-wide average of 20.5%.

A country portfolio review in May developed a time-bound action plan to improve performance. Positive developments in disbursements and progress in compliance with loan covenants and financial management procedures were noted. Recognizing the importance of effective project monitoring, monthly review meetings with executing agencies were initiated by the Kazakhstan Resident Mission.

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