Kazakhstan macro: Budget 2025 looks safer now with a weaker tenge

KAZAKHSTAN - Report 29 Nov 2024 by Evgeny Gavrilenkov

A couple of days ago, Majilis (the lower chamber of the Kazakh parliament) reportedly approved the updated version of the republican 2025 budget along with the indicative budgets for several following years. Legislators also amended the revenues and expenditures of the 2024 Kazakh republican budget. Not all the details of the 2025 budget are publicly available yet as they might be somehow polished by the upper chamber before the President signs it into law. The government assumed 5.6% GDP growth next year, which is an ambitious target, and the republican budget deficit at 2.7% of GDP.

Lacking tax revenues this year, the legislators had to amend the 2024 budget and lowered the revenue target to KZT14.1 trln (tax revenues and non-tax revenues combined). To finance expenditures in full, the authorities chose to increase transfers. They increased the so-called “targeted transfer” from the National Fund by KZT2.0 trln. The initial plan assumed this “targeted transfer” at KZT1.6 trln and the overall transfer at KZT3.6 trln—combined with another part called “guaranteed transfer” (KZT2.0 trln). Now, the total 2024 transfer is KZT5.6 trln, and the increased “targeted transfer” roughly shows the scale of the missing tax revenues.

We expected a continuous weakening of the tenge in 2025, and it came as a surprise that the tenge moved quite visibly as soon as November 28. It appeared to be a one-off move when the USD/KZT was close to 520 mark during the trading session. The NBK couldn’t refrain from intervening, and by the end of the trading day the USD/KZT moved close to 510 mark. It would be natural to see the tenge gradually moving toward USD/KZT540-550 by the end of 2025, implying about a 12% depreciation in average annual terms. If this happens, then the government will be able to accumulate at least KZT1.5 trln of additional revenues in the republican budget. The ongoing currency correction can help to naturally meet the 2025 deficit target and finance expenditures in line with the plan.

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