The Unsettling Conclusions of the Accounts Committee

The Kazakh authorities have been fighting against the few civil activists with quite a success. In other words, they do manage to fulfil their oppressive function. But as for kick-starting the domestic business and improving its competitive abilities, it does not come all that naturally to them.

Why is that so? There can be a number of explanations. One such explanation has been recently offered by Natalia Godunova, the Head of the Accounts Committee, at the plenary session of the Senate of the Kazakh Parliament devoted to the governmental report on the execution of the 2019 state budget.

Her speech of June 18, 2020, stirs interest if only because the Accounts Committee represents a somewhat oppositional structure in re the Kazakh government whose task is to trace, examine and assess the budget expenditures. And even though this oppositionism is obviously quite relative, nonetheless, it allows the agency and its staff to be more objective and critically minded than their colleagues from other state structures may allow themselves to be.                                              

In view of this, let us quote several interesting statements from the official Theses of the speech of the Head of the Accounts Committee given at the session the Senate of the Kazakh Parliament (text in bold by

«Today we are reviewing the Report on the last year budget execution. Albeit in very different circumstances. On one hand, we have registered the long-awaited economic growth, on the other hand, the situation is rather complicated this year. In the world and in our country. Therefore, now, taking into consideration that the violations we have uncovered have been discussed in the workshops and the Senate Committees, let us turn to some more systemic issues». 

«However, the reduction of the oil dependency has not been achieved. Over the course of 10 years, the share of the processing sector has not surpassed 11%. Mineral products constitute 70% of the export structure. The real household earnings have grown by 5,5%. However, the share of the grocery goods have increased up to 50% in the population’s expenditures.  

With that, bank loans to population are growing. In 2019, the growth of consumer loans had outpaced the growth of nominal income of the population by almost 15%.

Generally speaking, despite the significant support on the part of the state, the economy has been experiencing a decrease of the role of the banking sector over the past five years. The sector’s assets had decreased against the GDP from 60% in 2015 to 40% last year. Banks’ loan portfolio had decreased almost twice against the GDP of the country. Bad loans continue to grow.

There has been no available and „long-term“ financing for business. There is no such thing now. No one has calculated how much money is needed. The monetisation level continues to decrease. By 31% based on the results of 2019. Whereas back in 2016, it constituted 42%. To compare, the monetisation level in the world constitutes 122% on average».

«The sovereign debt as well as the governmental debt is kept within the safe limits. But the expenditures for its servicing and repayment are growing. These expenditures had reached almost 1.4 trillion tenge in regard to the governmental debt».

«Second, little has changed in terms of the revenue. The share of the corporate income tax (the main systemic tax) continues to be reduced in the structure of the tax collecting. In 2019, it already constituted less than 30%. This negative trend directly reflects the conditions of the business.

By the way, the sum intended for the VAT reimbursement as of January 1, 2020, grew twice against January 2019 (to 540 bln tenge against 284 bln tenge). This is what was not supposed to be paid to the state! A part of this sum will be cleared on the basis of bilateral obligations or reimbursed to the business in the first half of the current year. Thus, we are taking money from turnovers of law-abiding entrepreneurs. And by returning the surpass taxes paid last year, we impose a load on the budget of the current year».

«By wishing to simplify the conditions for the functioning of the business, we lose control over the state interests. We believe it necessary to review our approaches and lend clarity to benefit recipient reporting. The business should have reciprocal obligations to the government».

«Of courses, one wishes to hope that a time will come when the methods of assessing the socio-economic effect will be developed not by the state auditing structures but by the relevant agencies. And since the government does not have such methods and instruments,  we have assessed the effect on the basis of the statistical and agencies’ data for the period of approximately seven years. With that, we have taken into consideration the share of the state investments in the development of an individual economic sector.

The conclusions are unsettling. The general multiple-effect is estimated at a medium level with a significant growth potential. 1 tenge of investment has increased the average output by 90 tiyn (0.62 tenge to 1.16 tenge). In 2015, the World Bank estimated that, for Kazakhstan, the multiplicator of budget expenditures (in other words, the aggregate) equaled 0.2 — 0.3. In other words, for every invested budget dollar, only 20-30 cents return as the real effect. This is two times lower than the showings of the developing countries where this indicator reaches 0.6.

The worst is that most of the jobs we create are temporary».

In our opinion, the Accounts Committee of the Republic of Kazakhstan has expressed its views rather succinctly. Once again, it has confirmed to the public that Kazakhstan’s domestic business is systemically «ill» and the «super-presidential» state, despite its numerous promises, assurances and efforts, has still been unable to achieve any kind of success in this area.

The reasons for the failure are clear — the authoritarian political system does not have a mechanism of a rational balancing out of the major players of the economic process. It also suppresses initiative both at the level of individuals and at the level of social groups. As a result, Kazakhstan is winning the unofficial competition among the states thanks to its natural resources and a greater severity of power but is losing it due to every thing else.

Unfortunately, even Nursultan Nazarbayev’s departure from life and political arena will change nothing because only one person will be leaving the game. The rest will remain intact.                                         

Yes, the power vertical and the firmness of the ruling elite will probably be weakened but that is all. And we are very much afraid that tens of years and new generations of Kazakhs will be needed for the situation to start changing for the better. And it is not at all clear when it happens — the bright future promised to the citizens by the Kazakh authorities with amazing regularity is hiding way over the horizon unobservable to any of the onlookers today. 


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