The President noted at an extended government meeting in February of this year that financial inefficiency in the healthcare system is a serious problem, despite significant investments in the sector over the past five years, pointing to the work of the Social Health Insurance Fund.
Economists express concern that a significant portion of funds (3.3% of GDP) is spent outside the budget, without control from the government and the public. Contributions to just three extra-budgetary funds amounted to 3.9 trillion tenge last year, highlighting the substantial scale of financial flows outside the state budget, reports inbusiness.kz.
In an interview with Inbusiness.kz, the director of the Talap applied research center, Askar Kysykov, noted that the government could consolidate extra-budgetary funds, primarily the SHIF and the Social Insurance Fund, as they operate on a solidarity principle. The functions of these extra-budgetary funds could easily be financed within the budget through taxes.
"Previously, before the establishment of the SHIF, the committee for the payment of medical services successfully fulfilled its tasks. It might be worth returning to such a practice; however, the social block and representatives of the extra-budgetary funds resist this idea, as they do not want to give up their financial independence and lack of control over their funds. They independently manage financial flows, and no serious restrictions and control measures that exist within the budget apply to them," he noted.
Inbusiness.kz decided to gather figures on how much money key extra-budgetary funds of the country collect from Kazakhstanis.
Social Health Insurance Fund
The fund has a special status as a strategic purchaser of medical assistance for the population of Kazakhstan and performs the functions of a financial operator of the funds of the compulsory social health insurance system (CSHI) and the guaranteed volume of free medical assistance system (GVFMA). The customer of these services is the Ministry of Health of Kazakhstan. Contributions are made by both the working population and the state for certain categories of citizens (children, pensioners, etc.).
The medical assistance procurement plan for 2023 amounted to 2.5 trillion tenge, where the GVFMA budget is 1.5 trillion tenge, and the CSHI budget is just over 1 trillion tenge. Compared to the previous year, funding increased by 19%, reported the Social Health Insurance Fund. As a result of procurement procedures, contracts were concluded with 4,856 medical service providers for a total of 2.5 trillion tenge. The total actual number of employees of the fund as of December 31, 2022, was 867 people. The fund's income in the form of commission fees in 2022 amounted to 0.67%, which amounted to 10.5 billion tenge, of which 5.6 billion tenge was directed to employee salaries.
Despite the allocation of colossal sums from the budget and contributions from citizens, the CSHI Fund is one of the extra-budgetary funds that constantly faces criticism for inefficiency. Patients report poor quality medical services in institutions funded by the CSHI. Long queues for examinations lead patients to seek care in private clinics. The CSHI system does not allow patients to receive medical services where it is convenient, but only at the clinic to which they are attached.
Patients are often forced to pay extra for medical services or purchase medications out of pocket. These issues undermine trust in the CSHI system and lead to ineffective use of public funds allocated for healthcare. To improve the situation, it is necessary to increase the transparency and accountability of the CSHI, strengthen financial management, and establish effective control mechanisms.
State Social Insurance Fund
According to the latest financial report of the company for 2023, the fund's assets amounted to 1.3 trillion tenge. Revenues for the year amounted to 690 billion tenge, of which 536 billion tenge were social contributions and 152 billion tenge were investment income. The fund's assets include government bonds from the Ministry of Finance, Kazakh Railways, Development Bank of Kazakhstan, the Baiterek holding, and other issuers.
The governing body of the fund is the Ministry of Labor and Social Protection of the Population. It should be noted that social contributions of 3.5% of the employee's income are made by the employer. The fund's own resources include the authorized capital and commission income, the rate of which in 2023 did not exceed 0.70%.
The fund conducts investment activities through the National Bank, placing its assets in financial instruments. According to the report, commission income last year amounted to 3.5 billion tenge, of which 2.3 billion tenge were directed to salary expenses. It is worth adding that payments during the pandemic of 42.5 thousand tenge were made from the SSIF.
Unified Accumulative Pension Fund
Contributions to the UAPF in 2023 amounted to 2.1 trillion tenge. As of April 1, 2024, individual and conditional accounts of depositors of JSC "UAPF" have accumulated pension savings totaling 18.9 trillion tenge. Since the beginning of the year, their growth has amounted to about 1.02 trillion tenge (5.7%). Notably, interest income in the first quarter of 2024 nearly matched the amount of contributions, vividly reflecting the power of compound interest and the importance of effective management of one's pension savings.
Compared to the same date last year, the volume of pension savings increased by almost 3.5 trillion tenge or 22.6%. In 2022, the fund received commission income of 0.01% per month from the amount of pension scheme assets, which amounted to 16.1 billion tenge for the year. As of December 31, 2022, the number of employees in the fund was 1,367 people. Personnel expenses amounted to 8.6 billion tenge.
Since the beginning of the second half of 2023, all Kazakhstanis are allowed to transfer up to half of their pension savings to private managers for more effective management of pension assets. In other words, Kazakhstanis can indirectly influence the quality of management and the growth rate of their pension savings by choosing a manager.
Social Fund "Qazaqstan Halqyna"
As of May 1, 2024, the fund received 247 billion tenge. In 2023, the fund provided charitable assistance amounting to 65 billion tenge. The report on receipts to the OF "Qazaqstan Halqyna" states that from January 1 to April 30, 2024, 50.9 billion tenge was received. During this period, the fund provided charitable assistance amounting to 25.6 billion tenge.
The total cost of approved charitable programs and projects is 199 billion tenge, the total cost of signed contracts is 133 billion tenge, and 116 billion tenge has been actually paid for charitable programs and projects.
Problem Loans Fund
In the financial report of the company for 2022, it is stated that as of December 31, 2022, the group had an accumulated loss of 257 billion tenge (as of December 31, 2021 – 266 billion tenge). As previously mentioned in an interview with inbusiness.kz by deputy Tatyana Savelieva, the Problem Loans Fund was created during a crisis period, and it had specific goals. The government is considering the need for the fund's further operation up to its closure. In this regard, there is no need to include provisions for the PLF in the Budget Code.
The second part of the question concerns the rescue of banks. The current Budget Code outlines a mechanism for targeted transfers to improve the quality of banks' loan portfolios, but this provision is excluded from the new code, thereby eliminating the possibility of supporting banks. It should be noted that the losses of this fund amounted to 3 trillion tenge, related to the purchase of problem loans from BTA, Kazkommertsbank, Tsentrcredit Bank, and others.
Education Infrastructure Support Fund
This fund was established in February 2023. It is formed from funds seized in corruption criminal cases, aimed at financing the construction and reconstruction of secondary education facilities. The fund does not have an official resource. According to government data announced in December last year, about 150 billion tenge seized from corrupt officials was received by the fund. In Kazakhstan, by the beginning of the 2023/2024 academic year, 13 schools with 24,566 student places were put into operation using funds from the Education Infrastructure Support Fund. This was reported by the press service of the Ministry of Education of Kazakhstan.
Compensation Fund for Victims
Was established in January 2018. It is aimed at creating a legal basis for providing material assistance to individuals harmed by crimes. The main source of replenishment of the fund is criminal fines. In general, it is financed from four sources – these are fixed payments imposed by the court; monetary penalties for non-fulfillment of procedural duties; receipts from corrective labor; and regressive recovery of compensation from the guilty party.
The law defines three categories of victims. These are minors who are victims of sexual violence, victims of human trafficking and torture – under eight articles of the Criminal Code. The second category includes victims who have suffered serious harm to health or are infected with the human immunodeficiency virus – HIV/AIDS, under 19 articles. And the third category includes heirs in the event of the victim's death as a result of a criminal offense – under 35 articles. However, there are no amounts accumulated in this fund in open sources.
According to the General Prosecutor's Office, announced in March 2023, at that time the Ministry of Finance had paid more than 312 million tenge to citizens materially harmed by crimes but who had not received compensation for damages because the crime was not solved or the perpetrator was evading justice.
What about transparency and accountability?
Currently, extra-budgetary funds are not included in the republican budget. Accordingly, there is no full parliamentary oversight over the expenditures of those that operate on a solidarity principle. The government provides the parliament with an analytical note on state finances, but these reports are not approved by the parliament, allowing the government to use funds without proper control. This practice is criticized by the World Bank, OECD, and IMF, which call for a more transparent budgeting system.
This creates serious problems in the expenditure of public funds and requires the participation of parliament in approving all expenditures. Considering the assets of extra-budgetary funds, state holdings "Samruk-Kazyna" and "Baiterek", which are also financed from the budget, about half of public finances are outside the control of the public and parliament, creating problems in financial transparency and management, emphasized economist Murat Temirkhanov in an interview with inbusiness.kz.