Kazakhstan’s Government Goes Back to Its Piggy Bank

The decision to withdraw more from the National Fund contradicts earlier objectives to increase assets and lower inflation

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Kazakhstan’s government is reinstating targeted transfers from the National Fund, a U-turn from its earlier policy to forgo withdrawals from the Fund to prevent its depletion. In the shadow of President Kassym-Jomart Tokayev’s infrastructure-focused policy, the government now plans to direct the funds towards “major construction projects.”

Economists interviewed by Vlast call this decision a necessary measure, because alternative funding sources have already been exhausted. At the same time, they worry that these funds will be allocated to more than just infrastructure, with less transparency surrounding their expenditure compared to foreign loans. Most importantly, this decision will increase the dependence of the national budget on oil sales, in direct contradiction to the government’s stated objectives.

In late August, Tokayev announced that the country needed to accomplish a “great deal of tasks” and “essentially transform all of Kazakhstan into a large construction site, particularly for public facilities for citizens.” To this end, he said, Kazakhstan must once again tap into the National Fund.

A year earlier, Kazakhstan’s authorities had announced the decision to forgo withdrawals from the National Fund for the following three years, aiming to curb its rapid depletion. Since the beginning of the pandemic, the government had been dispensing approximately 5 trillion tenge ($11.2 billion) from the fund each year. Withdrawals peaked in 2024 at a total of 5.6 trillion tenge ($12.5 billion). Such extensive reliance on the National Fund has made the prospect of increasing its assets from around $60 to $100 billion by 2030, a goal previously outlined by Tokayev, increasingly unattainable.

In 2026, after the discontinuation of targeted transfers, the volume of annual withdrawals (in the form of so-called ‘guaranteed transfers’) was expected to decrease to 2.7 trillion tenge (around $6 billion). The government further planned to shore up the fund’s assets via tax revenue, which was expected to increase following tax reforms implemented in 2025.

However, the government already plans to withdraw an additional 2 trillion tenge ($4.5 billion) from the National Fund next year, and up to 1.5 trillion tenge ($3.4 billion) in 2028 and 2029.

The ministry of national economy told Vlast that the National Fund was not exclusively conceived as a “safety net” for the future. In an inflationary environment, financial resources lose some of their real value over time, so they can be invested in projects deemed to be of critical and national importance.

The ministry stated that the funds will be designated for the construction and modernization of hospitals and clinics, as well as the development of the gas transmission system, heat and electric power industry, and transportation infrastructure. It will also be allocated towards defense facilities, and law and order.

“The infrastructure, as a rule, is not attractive enough by itself to the private sector in terms of direct commercial returns, as these projects require significant capital investment, the benefits of which are manifested in the longer term,” the ministry’s response noted.

The ministry added that financing these infrastructure projects from the state budget alone, given its limited capacity, could delay their implementation for years.

For the ministry, the use of the National Fund’s resources is considered to be in accordance with the task of preserving and augmenting its assets. To this end, the National Fund has gradually increased its shares of global equities, corporate bonds, emerging market bonds, and alternative investments. This should ensure the fund’s long-term returns grow by at least 1% annually.

Why Are Withdrawals Increasing?

Sholpan Aitenova, director of the Zertteu Research Institute, believes that the government has genuinely succeeded in establishing its fiscal policy this year. The state has limited guaranteed transfers to 1.9 trillion tenge ($4.3 billion) and increased budget revenues. However, this does not enable Kazakhstan to resolve all outstanding problems associated with its economic development.

Economist Kassymkhan Kapparov deems that resorting once again to National Fund resources is a necessary measure, since alternative sources of funding have already been depleted. The influx of foreign investment in Kazakhstan is waning, and banks are unable to significantly expand their investment portfolios. There is also no growth in real income, which otherwise could provide businesses more funds for their own investments.

“Significant extrabudgetary funds have already been expended over the past five years. The Social Insurance Fund made payments of 42,500 tenge ($96) during the pandemic, and funds from the Single Pension Fund—from which up to one trillion tenge ($2.3 billion) per year had previously been withdrawn—were primarily used to support the construction sector through mortgages,” he explained.

According to Aitenova, Kazakhstan does not have the capacity to borrow the remaining funds from international development institutions rather than from the National Fund.

“Our economy isn’t that strong and is highly vulnerable to external shocks, so we can’t borrow much. Servicing and repayment of the national debt constitute over 10% of government expenditures for next year. That’s quite a big share,” she noted.

According to Kapparov, Kazakhstan’s credit ratings continue to improve, but this primarily impacts the flow of funding to the Astana International Financial Centre (AIFC), which does not produce the same economic benefit as direct investments in domestic enterprises across various sectors.

“Essentially, the National Fund is the last remaining source [of funding], even for ambitious projects, such as construction of the nuclear power plant or light rail in Almaty and Astana, as well as the modernization of large enterprises, such as the Qarmet metallurgical complex. [Its use] is consistent with the logic of the government to constantly make more funding available, in order to ‘put another log on the fire’ and support economic growth,” he said.

What’s the Government’s Ultimate Goal?

Resuming targeted transfers, according to Aitenova, means that the government’s actions could once again conflict with the Central Bank’s objective to curb price increases.

“If we decide to pour money into the budget again, we will overheat the economy and create inflationary pressure,” she said.

Kapparov, instead, concedes that inflationary pressures might not be as severe. In his estimation, transfers will flow through corporate channels, not consumer ones.

He believes that “only 20-30% of the allocated funds will go into the economy, including via wages, and the bulk of them will be used to purchase imported machinery and equipment.”

According to Aitenova, transparency in the use of these funds is not to be expected: unlike loans from international development institutions, which would be subject to scrutiny and targeted expenditure, the resources of the National Fund are reserves that the government can spend at its own discretion.

But if the funds really prop up infrastructure projects, they could lay the foundations for future growth, rather than simply becoming current expenses. And such investments are very necessary, given that the share of the development budget decreased over the past year by 1.6 percentage points to 6.4%.

“But all of this only works on the condition that these projects are executed promptly and efficiently. And if you look at reports from the Supreme Audit Chamber, our infrastructure project implementation has been in a dismal state, going back to the pre-construction phase. According to this data, 141 out of 683 planned infrastructure projects in 2025 were not completed,” Aitenova noted.

Kapparov said that the National Fund was originally created as a way to limit the impact of petrodollar influx on the economy, slowing the appreciation of the tenge and strengthening the competitiveness of the manufacturing industry. But given that transfers may be allocated to more than just infrastructure, this reasoning may be undermined.

“There are in fact currently other projects that are billed as infrastructure, but in reality, they will be part of ‘industrial innovation’ plans,” Kapparov said, hinting that these projects essentially substitute capital expenditure for large exporters that need to modernize their facilities.

Based on precedents, Aitenova did not consider the rapid depletion of the National Fund a critical risk in itself. During the pandemic and the financial crises of the past two decades, even more funds were withdrawn. Instead, Aitenova argued that the parameters of the budget itself represent the biggest issue. The budget was supposed to become less dependent on capital injections from the National Fund after the 2026 tax reforms.

“This year’s government expenditures amount to 30 trillion tenge ($68 billion), while revenues are 19 trillion ($43.1 billion). Ideally, revenues should fully cover expenditures. And seeing as this is not the case, there will be repercussions,” Aitenova noted.

Kapparov said he is also concerned by the growth of the non-oil fiscal deficit. Apart from targeted transfers, another 2-3 trillion tenge ($4.5 - 6.8 billion) in guaranteed transfers are withdrawn from the National Fund annually, resulting in a total of around 20 trillion ($45 billion) in withdrawals over a three-year period.

“If over the course of three years the price [of oil] remains higher than $80 a barrel, the National Fund could even remain at the same level. But if in the coming years 20 trillion tenge ($45 billion) are taken from it, that would be substantial, because a large portion of this money will go to imports, and not to our economy,” concluded the economist.

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