Kazakhstan’s President Nursultan Nazarbayev met with the country’s Finance Minister Bakhyt Sultanov on Monday to discuss ways the government can further achieve economic growth and hedge against difficult times due to things like falling oil prices.
Nazarbayev identified three areas on which he expects the government to focus, in order to increase development within what is the Caspian region’s third largest economy.
“First, it is necessary to raise revenues to the budget via cultivation of appropriate mechanisms. If necessary, foreign experience should be studied. Second, there is need for reducing government spending. Third, it is necessary to use the allocated budget effectively,” President Nazarbayev said, addressing the meeting in Astana.
He directed the finance ministry to identify and implement mechanisms for replenishing the budget and ensure a safe debt level.
“Economic growth mainly depends at the expense of the National Fund,” Nazarbayev explained, referring to a stabilization fund created in 2000 to hedge against price swings of oil, gas, and metals.
“Many organizations are only waiting for these funds for further development. The finance ministry should limit and control this process. We need to increase our National Fund,” President added.
As a result of economic fluctuations amid a sharp fall in oil prices in 2014, the National Bank of Kazakhstan was forced to announce the devaluation of the national currency, the tenge. This was the second devaluation in just five years. In 2009, the tenge weakened against the US dollar by 23.8 percent.
According to Nazarbayev, attempts to maintain the exchange rate during the first half of 2015 cost Kazakhstan $28 billion, which were taken from the National Fund. In August of that same year, the government adopted a floating exchange rate, which resulted in a decrease in GDP by 16.7 percent for 2015, amounting to $184 billion compared to $221 billion in 2014, according to statistics compiled by the New York-based firm Trading Economics.
Kazakhstan is overwhelmingly Central Asia’s wealthiest economy, generating over 57 percent of the region’s gross domestic product (GDP) in terms of purchasing power parity, according to US government statistics. Its wealth primarily comes from oil and gas, as well as vast mineral resources. While Kazakhstan is the third largest economy in the Caspian region, it is dwarfed by Russia and Iran, and comprises just nearly eight percent of that region’s GDP.
Nazarbayev’s recent remarks to his finance minister follow a major address he gave in January, entitled “Third Modernization of Kazakhstan: Global Competitiveness”, where he outlined his vision for the country and said a goal should be to make Kazakhstan one of the world’s top 30 developed countries by 2050. Nazarbayev called for accelerated technological modernization of the economy, saying,
“It is necessary to create a new model of economic growth that will provide the country's global competitiveness.”
Kazakhstan, with over 18 million inhabitants, currently stands at number 74 globally in terms of GDP per person (purchasing power parity). But despite it having the second highest GDP per person in both the Caspian and Central Asia regions, some still view Nazarbayev as overly ambitious.
Asel, a resident of Kazakhstan’s southeastern city of Almaty, told Caspian News that it is too early to talk about any changes in the economy.
“As a resident, I do not feel any changes. Perhaps by the end of the year we will look back and have seen something, but right now everything is on the same level,” Asel said. “Honestly, we always hope for the best. I personally look forward to modernization in the field of healthcare as this is a promising and in-demand industry, as well as the development of IT and on-line services,” she added.
Fikret Sadikhov, an Azerbaijani political analyst and professor at Western University in Baku, believes Nazarbayev’s vision accurately reflects developments and technological trends found throughout the world.
“The President of Kazakhstan is a wise and experienced politician, he understands that the country should focus on advanced technologies, on new models of economic development and that it is necessary to make maximum efforts and take steps that meet actual requirements and dictates,” Sadikhov told Caspian News.
Nazarbayev, now age 76, has led Kazakhstan since its founding after the collapse of the USSR, in December 1991.
“I think that around Nazarbayev there are enough politicians who can be trusted and who can successfully lead the republic in subsequent years,” Sadikhov added. “These people are not just loyal to him, but they support his course for the country and are ready to take over when the time comes, to lead Kazakhstan along the path that brings the country into full integration into the world space.”