Budget policy of Kazakhstan
Kazakhstan’s budget policy has become especially relevant in light of the updating of the country’s Tax and Budget Codes, as well as taking into account the dynamics of the state budget deficit in recent years. In 2024, the expenditure side of the budget (prior to the transfer component) again reflected a significant shortfall in tax revenues — 89.2% of the previously planned target (95.6% of all non-transfer revenues), although in nominal terms the economy grew by 12.4% year-on-year. Excluding transfers from the National Fund of the Republic of Kazakhstan (NFRK), the state budget deficit was 6.8%, an increase compared to the prior two years (Fig. 1).
The difference between the final deficit and its assessment prior to transfers, which reflects the dependence of budget revenues on reserves, remains rather noticeable over the past decade, ranging from 3% to 8% of GDP. It is NFRK transfers that have become the mechanism that prevents state finances from falling into a debt trap, which would be extremely undesirable given the long period of high rates.
Figure 1. Kazakhstan’s state budget deficit
Sources: national agencies, ACRA
Dynamics of NFRK reserves
With regard to sovereign funds in general, there are not many sovereign governments in the world that use this instrument of public finance.1
Kazakhstan, having created and enlarged the NFRK, joined the small number of governments that use this instrument and has accumulated 25 years of experience in the operation of such a sovereign fund.
History of the NFRK
The NFRK was created in August 2000 as per a presidential directive in order to accumulate funds for future generations, ensure the stable socioeconomic development of the country, reduce dependence of the economy on the influence of adverse external factors, and reduce the dependence of budgets of all levels on the global oil price situation. The fund performs two basic functions: a stabilization function in relation to the national economy in the short and medium term, as well as a savings function in relation to obligations to future generations of the country’s citizens in the long term.
The first tranches were transferred to the fund in 2001 and 2002, while the peak of reserves in nominal terms was recorded in August 2014 (USD 77.24 bln). At the same time, at the initial stage, the logic of transfers was slightly different compared to later practice. First it was assumed that reserve transfers would be directed to the budget if oil prices were to fall below a predetermined conservative threshold, i.e., during periods of weak economic conditions. But in fact, transfers have been made at any oil price throughout the entire period of the fund’s existence.
In 2006, transfers from the NFRK became a source of budget revenues. There are two types of transfers: guaranteed (provided on an annual basis) and targeted (aimed at covering expenses related to the implementation of specific programs determined by the country’s president).
The total volume of transfers increased significantly in the crisis period (2008–2010) (Fig. 4) and then their share in the structure of the country’s total budget revenues declined slightly. However, in 2017, it reached a record level, which was followed by a major increase in 2020 amid the coronavirus pandemic. Thus, starting in 2006, transfers from the NFRK covered at least part of the non-oil budget deficit (the maximum share for the entire observation period reached 38% of total budget revenues, the average share was 24%).
Accumulated NFRK portfolio
Given that NFRK’s funds are used in the implementation of fiscal policy, and taking into account the asset portfolio’s yield, the fund’s reserves at the end of 2024 were estimated at USD 58.8 bln (KZT 27.6 tln), which is equivalent to 20.4% of Kazakhstan’s GDP for 2024. In some years, portfolio investments showed negative returns (Fig. 2); in nominal terms, reserves have grown markedly throughout the entire period of the fund’s existence, but in relative terms, they have decreased since 2017 (Fig. 3).
1 As of 2025, about 80 countries have some form of sovereign wealth fund, but their structure and purposes may differ significantly, making them not always comparable to the NFRK.
Figure 2. NFRK’s RoA, % p.a.
Sources: national agencies, ACRA
Figure 3. NFRK reserves in absolute and relative terms
Sources: national agencies, ACRA
The share of transfers is decreasing
As mentioned above, transfers are either guaranteed or targeted. After the first fiscal crisis in 2008 and throughout the subsequent years of the fund’s existence, the total share of transfers averaged 26% of state budget revenues. In the post-pandemic period (from 2022 to 2024), this figure dropped to 20%. Although it remains quite high, there is a trend to a lower dependence of budget revenues on the transfer component.
Figure 4. NFRK transfers to Kazakhstan’s budget
Sources: national agencies, ACRA
Unplanned transfers of an imputed nature — through the purchase of shares of quasi-public sector companies into the fund’s portfolio (for budget purposes)2 — have become more frequent and they also can be viewed as a kind of transfer, although they do not fall into the corresponding statistical category.
2 In 2023–2024, NFRK funds were used to purchase shares in state-owned companies to the fund’s portfolio for budget purposes: a 20% share in KazMunayGas for KZT 1.3 tln was purchased in 2023, and a 12% share in Kazatomprom was purchased for KZT 467 bln in 2024.
The use of NFRK transfers for budget purposes slowed down the accumulation of reserves, but contributed to keeping government debt at bay
In the absence of transfers, actual budget deficits could have been serious, giving rise to the need to completely revise budget expenditures or use other sources to cover the increased deficits. These include an increase in government debt, active privatization, reallocation of certain revenues from the NFRK to the budget directly, and capital injections to state-owned companies, which, subsequently, would result in more tax revenues and/or dividends in favor of the budget. At the same time, the uncovered part of the expenditures would fall on other revenue sources of the expanded government and/or on the quasi-public sector. The most likely scenario is an increase in government debt.
The actual national debt of Kazakhstan (excluding guarantees and sureties) at the end of 2024 amounted to KZT 31.8 tln, or 23.5% of GDP; with the share of government debt at 22% of GDP and the share of internal government debt at 16%. These are more than moderate indicators on an economic scale. The total of all transfers to the state budget, given the NFRK portfolio yield for the period from the year of the transfer to the end of 2024, is about KZT 102 tln (at the USD/KZT exchange rate at the end of last year). If we assume the absence of transfers to the budget against the background of significant growth of public debt due to the increased deficit, then by the end of 2024 the cost of increasing public debt, based on actual yield3, would have been about KZT 72tln, or 53.5% of GDP in 2024. It is clear that NFRK transfers made for budget purposes did not allow reserves to increase more actively, but contributed to maintaining Kazakhstan’s public debt at a moderate level (Fig. 5).
3 The indicator calculated as a ratio of actual debt service costs to the volume of debt at the end of the preceding period.
Figure 5. Government debt of Kazakhstan and NFRK reserves, % of GDP
Sources: national agencies, ACRA
