IMF to Kazakhstan: strengthening of banks, private sector growth needed

18 November 2019 15:00 (UTC+04:00)

By Trend

While overall situation in Kazakhstan has changed, the key challenges remain, International Monetary Fund’s (IMF) Mission Chief for Kazakhstan Mark Horton told Trend.

He noted that the past year has been significant for the country.

"Growth has been stronger than we expected. Fiscal adjustment has been postponed as additional resources have gone to higher wages and social support. President Kassym Jomart Tokayev’s September speech called for support for business, the regions, and the health, education and social sectors. Plans are to consolidate from 2020," Horton said.

He added that the country’s authorities are working to strengthen the medium-term fiscal framework and oil revenue management.

"On monetary policy, inflation has stayed within the target band, but rose this summer. Important technical improvements have been made, for example, to required reserves. In the financial area, additional support was provided last year to country’s Tsesnabank. This year, the authorities have launched a bank asset quality review (AQR), which will identify remaining issues and provide a road-map to address these," Horton said.

Structural reforms continue in the country, the official noted, including under the 100 Concrete Steps program (national state program aiming at economic development).

"The situation has changed, but key challenges remain. These include the need for more diversified, sustainable, and private sector-led growth; a reduction of the non-oil fiscal deficit to strengthen resilience and enhance buffers; a review of spending initiatives for effectiveness; enhanced monitoring of fiscal risks; and continuing with the inflation-targeting framework and flexible exchange rate," Horton highlighted.

 

He added that continued efforts are needed to strengthen banks, promote financial inclusion, create jobs, support vulnerable groups, improve public administration, and assess and plan for climate change.

"In last year’s consultation, we noted that a thriving private sector is needed to realize the aspiration of joining the world’s 30 most developed countries by 2050. The state remains predominant, and positive changes on paper have not always led to changes in practice," Horton said.

"Extensive state support risks cementing a culture of reliance on subsidies. The authorities are keenly aware of these challenges, and we see positive developments, but these factors are difficult to change overnight. Sustained actions are needed," the official concluded.

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