President Kassym-Jomart Tokayev emphasized in his address to the people of Kazakhstan that living within means is the only possible recipe for the stability of state finances, reports inbusiness.kz.
"Therefore, excessive spending on tasks that are not fundamentally urgent and strategic should be excluded. It is necessary to bring order to interbudgetary relations. The decision to leave tax revenues from small and medium-sized businesses in the regions was correct and timely. It has given a significant boost to entrepreneurship and increased the independence of akims. However, some regional leaders, having received an additional source of income, began to use it imprudently, without practical benefit to the state, on secondary tasks and projects. In order to find sources to cover the budget deficit, the government should develop rational compensation mechanisms," said the president.
In recent years, the government of Kazakhstan has been increasing its expenditures, primarily due to inflation, which requires the indexing of expenses. However, according to Askar Kysykov, director of the Talap Center for Applied Research, the majority of funds are directed towards current needs, especially social payments, healthcare, and education.
In his comment for inbusiness.kz, he noted that the structure of state expenditures shows that only about 20% of the budget is allocated for development, while the remaining funds go to current needs. A large portion of the budget is spent on procurement, capital expenditures, and construction, while investments in the future remain low.
"Moreover, the increase in expenditures on social payments, healthcare, and education is associated with the rise in salaries for teachers and doctors, as well as the growth in the number of recipients and the size of pensions and benefits. This is reflected in the dynamics of the budget. In the draft budget for 2025, the increase in expenditures on social payments amounts to over 600 billion tenge. Nevertheless, state expenditures relative to GDP remain stable at around 17-18%. Further increases in expenditures will require raising tax collection, which is one of the tasks that the new Tax Code must address. However, with rising expenditures, it is important to ensure a balance between current needs and investments in the future; it may be worth reconsidering the structure of expenditures and increasing the share of funds allocated for development," the economist notes.
Overall, in his opinion, one of the main problems is the low efficiency of investments. Many investment projects are insufficiently developed, and their profitability is questionable. An example of such a project is "Astana LRT," which will require significant subsidies from the budget in the future. This indicates the need for more thorough analysis of projects before their implementation, he continues.
"Another problem is the inefficient use of a number of state expenditures. Business support measures, such as subsidies or financing of the quasi-state sector, do not always yield the expected results, and their effectiveness is not monitored. However, they significantly burden the budget and additionally create many market distortions. As a result, the state does not receive the proper return in the form of an increase in the taxable base. If we look at the revenue execution plan, it is not being fulfilled this year. Estimates suggest that the shortfall in revenue may exceed 3 trillion tenge. This, in turn, will require additional transfers from the National Fund or an increase in the budget deficit and, consequently, public debt," emphasizes Askar Kysykov.
To address these issues, attention can be paid to the mechanism of public-private partnerships (PPP). Attracting private investments for the implementation of social and infrastructure projects can be one way to optimize expenditures and find alternative sources of financing. Establishing market tariffs and ensuring the profitability of projects is a key aspect for the successful development of PPP in the economy, the speaker concluded.