Kazakhstan’s Push for Growth via SOEs Could Undermine Fiscal Discipline: IMF

An IMF report finds that Kazakhstan’s state-owned enterprises have significantly expanded spending outside the formal budget, making the country’s true fiscal stance more expansionary than official deficit figures suggest. It warns that rising quasi-fiscal activities and financial weaknesses in major state holdings pose growing macroeconomic and fiscal risks.

A new International Monetary Fund (IMF) study suggests that Kazakhstan’s fiscal policy has been far more expansionary than official budget numbers indicate. While government deficit figures point to gradual consolidation, the IMF argues that a significant amount of economic stimulus has been delivered through state-owned enterprises operating outside the formal budget. Once their activities are included, the overall public sector stance looks much looser than it appears on paper.

The report highlights how Kazakhstan’s development model relies heavily on powerful state-controlled companies. These firms do more than operate commercially; they act as vehicles for economic policy, investment and crisis response.

Two Giants at the Heart of the System

The IMF analysis focuses on two major state holdings: Samruk-Kazyna (SK) and Baiterek National Managing Holding (BNMH). Together, they dominate key sectors of the economy. SK controls strategic assets in oil, gas, uranium, electricity, transport and telecommunications. BNMH oversees development banks and financial institutions that support housing, infrastructure and small and medium-sized enterprises.

Their combined scale is striking. By 2024, their total assets had grown to roughly 55 trillion tenge, equivalent to about 40 percent of Kazakhstan’s GDP. SK alone accounts for assets equal to nearly one-third of the economy. Such size makes these entities central not only to industrial development but also to macroeconomic stability.

Through mortgage programs, subsidized lending and large infrastructure investments, these holdings effectively implement state policy. In practice, they function as an extension of the government’s fiscal arm, but without being fully captured in official budget reports.

Spending Beyond the Budget

The IMF’s key concern is transparency. Kazakhstan’s fiscal reports do not fully include quasi-government entities, creating blind spots when assessing the true public sector position. When state companies borrow and invest, they increase demand in the economy just like direct government spending would, but this activity is not reflected in headline deficit numbers.

Between 2019 and 2024, the balance sheets of major state enterprises expanded by an amount equivalent to roughly 20 percent of annual state budget expenditure. If these operations had been recorded as regular budget spending, the non-oil fiscal deficit would have been several percentage points higher each year.

In other words, Kazakhstan’s fiscal stance has been more expansionary than official data suggests. This has implications for inflation control, fiscal discipline and overall macroeconomic management.

Crisis Response and Future Plans

State-owned enterprises played an important stabilizing role during past shocks. During the global financial crisis, the oil price collapse of 2014–2015 and the COVID-19 pandemic, these companies sharply increased lending and investment to cushion the economy.

However, the IMF notes that outside crisis periods, policy has often remained procyclical, adding stimulus even when economic conditions were strong. This makes it harder to control inflation and shifts more of the stabilization burden onto monetary policy.

Looking ahead, the government plans to significantly increase investment to raise GDP to US$450 billion by 2029. Much of this expansion is expected to flow through state holdings, particularly through infrastructure lending and capital spending programs. While the 2026 state budget calls for consolidation, expanded quasi-fiscal operations could offset those tightening efforts, leaving the overall public sector stance relatively loose.

Mounting Financial Risks

Beyond short-term macroeconomic concerns, the IMF warns of growing fiscal risks. Large-scale subsidized lending and implicit subsidies in areas such as energy can weaken profitability and create future liabilities. If commodity prices fall or financing conditions tighten, the government could face pressure to provide support.

Financial indicators reveal vulnerabilities within some subsidiaries, including weak profitability, thin liquidity buffers and elevated debt levels. Since a large share of revenue in key state holdings comes from oil and gas, public finances remain exposed to global energy price swings.

The IMF recommends stronger monitoring of state-owned enterprises, clearer reporting of their debts and obligations, and better integration of their activities into the national fiscal framework. It also calls for clearer rules on government support and faster privatization in non-strategic sectors.

Kazakhstan’s state enterprises have long been engines of growth and crisis response. But as the IMF report makes clear, their expanding role is reshaping the country’s fiscal landscape. Bringing these activities fully into view may be essential to preserving stability and ensuring sustainable growth in the years ahead.