Multi-dimensional Review of Kazakhstan

Volume 2. In-depth Analysis and Recommendations

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Kazakhstan has embarked upon an ambitious reform agenda to realise its aspiration of becoming one of the top 30 global economies by 2050. The country’s economy and society have undergone deep transformations since independence. To sustain economic progress, overcome recent difficulties, and drive improvements in well-being to realise its aspirations, Kazakhstan will need to address a number of challenges to ensure its economy becomes more productive and diverse, and is sufficiently flexible and resilient in the face of an ever-shifting external environment. This next stage of economic transformation will require continuing reforms. This report discusses policy actions to address four key obstacles to development in Kazakhstan, identified in Volume 1 of this review. It presents in-depth analysis and recommendations to improve the economy’s resilience through diversification, to mobilise financing for development, to transform the role of the state in the economy, including through privatisation, and to improve the effectiveness of environmental regulations.


Mobilising financing to transform Kazakhstan's economy

OECD Development Centre

Kazakhstan’s financial sector is unusually shallow. No comparable country achieves income levels higher than Kazakhstan with a pool of deposits and credit of such little depth. Kazakhstan’s entrepreneurs cite access to finance among their major obstacles to investment, especially newer or smaller firms, while larger firms circumvent the domestic financial system by tapping international sources. Domestic securities markets are anaemic, but this is unlikely to significantly slow economic transformation. This chapter describes how the availability of domestic finance is constrained by the limited pool of domestic investable funds, which can be attributed to both transitory and structural factors that encourage capital outflows. The government’s various financing programmes provided some support during the financial crisis, but without generating lasting gains in the availability of credit, either for the sectors targeted or more generally, and weaker oil revenues make them difficult to sustain. A more sustainable response would support banks’ access to loanable funds, from international sources and by strengthening the institutional infrastructural surrounding the financial sector to encourage domestic savings. The shift to an inflation-targeting monetary policy regime in 2015 and the development of the Astana International Financial Centre will help achieve these objectives if domestic institutions governing the financial sector are also strengthened.



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