Kazakhstan plans to introduce countercyclical fiscal rule limiting volume of transfers from National Fund — Erbolat Dossaev

The main attention of the National Bank of Kazakhstan together with the Government of Kazakhstan will be paid to returning inflation to the target corridor of 4-6% in 2022. This was announced by the Chair of the National Bank Erbolat Dossaev at the government session chaired by the Prime Minister Askar Mamin.

“The Head of State in his Address noted the increased influence of non-monetary factors, in particular, food prices. Growth in food inflation following the results of 8 months of this year amounted to 11.4% as a result of regular imbalances in certain markets, despite the formal coverage of demand by domestic production. An illustrative example of this year is the jump in prices for potatoes and carrots, uncharacteristic for the summer months, due to their uncontrolled export in the off-season and, as a result, creating a deficit in the domestic market,” Dossaev said.

Based on the above factors, for the implementation of the instructions of the Head of State, the main emphasis in the fight against the rise in food prices by the Government and akims should be made on the full saturation of the domestic market, taking into account the balance of production, export and import of goods.

To effectively solve the tasks set in the Address to return inflation to the target corridor in 2022, a set of anti-inflationary response measures for 2021-2023 has been prepared and is at the final stage of approval.

Coupled with the Agreement on the Coordination of Macroeconomic Policy for 2021-2023. These measures should ensure a significant reduction in the non-monetary factors of the food and non-food components of inflation, and ensure a predictable and balanced tariff policy on a medium-term basis.

The Head of State in his Address also noted that the reserve of financial stability is not unlimited. Today, an additional source of pro-inflationary pressure is a significant increase in government spending, the growth of which is covered by an increase in the budget deficit and transfers from the National Fund. In this regard, in accordance with the instruction of the President of the Republic of Kazakhstan, a countercyclical budgetary rule will be introduced, which should limit the volume of transfers from the National Fund and the growth rate of government spending. For this, the Government, together with the National Bank, will develop amendments to the Budget Code and the corresponding approaches will be enshrined in the Concept of Public Finance Management.

"The Economy of Simple Things program on behalf of the Head of State will be extended until the end of 2022 by the decision of the National Bank in September this year," the head of the financial regulator informed.

For the further development of lending to entrepreneurship, especially in rural areas, together with the Agency for Regulating and Developing the Financial Market, by the end of this year, a package of necessary solutions will be prepared to expand the capabilities of MFOs.

In order to qualitatively implement the task set by the Head of State to return inflation to the target corridor and increase the efficiency of monetary policy, the National Bank intends to take the necessary measures to ensure price stability.

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