Previously we’ve examined the revenue side of the republican budget for the first half of 2024. Now, continuing the analysis, let’s take a look at the expenditure side of the budget.
The question arises: why is it necessary to know about budget expenditures? Imagine you are managing your household budget. You know how much money you earn each month, and you plan how to spend it: on groceries, utilities, your children’s education, perhaps on home repairs, or a long-awaited vacation. It is important to spend money wisely; otherwise, you might find yourself in a situation where there’s not enough left for something truly important.
The republican budget operates the same way, but on a much larger scale. The government, like any family, must plan its expenditures to ensure that money is directed toward important and necessary goals: building roads, schools, and hospitals, paying salaries to doctors and teachers, developing the economy, and supporting the underprivileged. Monitoring how these funds are allocated directly impacts our life quality. If money is directed towards infrastructure development, we get new roads and modern hospitals. If funds are invested in education, our children receive a better future. However, if expenditures are inefficient or there is a lack of transparency, state funds could be spent on projects that bring no benefit or even create additional problems.
For example, if a large portion of the budget is spent on projects that do not generate income or increase the country’s debt, in other words is “wasted” this could lead to a situation where we have to pay more taxes in the future, or the government may simply run out of funds for essential needs.
Therefore, it is important for every Kazakhstani to monitor how and where budget funds are spent. This is not just the business of the state or officials—it’s a matter of our well-being and the future of our country.
For a better understanding of the situation, you might try playing the game Rebel Inc: Escalation, where you will need to solve strategic tasks under a limited budget and deal with the impact of inflation.
According to data from the Ministry of Finance of the Republic of Kazakhstan (hereinafter referred to as the Ministry), as of July 1, 2024 or by the end of the first half of 2024, the total expenditures of the Republican budget amounted to 10.6 trillion tenge, which is 3% less compared to the first half of last year. At the same time, revenues of the Republican budget for this period amounted to 8.7 trillion tenge, which is 1.2% more than in the same period last year. These figures indicate that the deficit of the Republican budget currently stands at 1.9 trillion tenge, meaning Kazakhstan is spending much more than it earns. Additionally, the share of transfers from the National Fund accounted for 31.7% of budget revenues. If the budget deficit were considered without transfers, it would have amounted to 4.9 trillion tenge. This shows that without additional withdrawals from the National Fund, Kazakhstan would not have been able to cover nearly half of its needs.
The expenditures of the Republican budget consist of expenses, net budget lending, and the balance of operations with financial assets. The main part of the expenditures is expenses: in the first half of 2024, their share amounted to 99.1%. According to the Budget Code of the Republic of Kazakhstan dated December 4, 2008, Chapter 3, Article 12, “expenses are budget funds allocated on a non-refundable basis.”
Simply put, in the context of the republican budget, expenses are the main part of expenditures, including all types of government spending aimed at fulfilling the functions of the state. This is the money the government spends on fulfilling its obligations: building and repairing roads, funding schools and hospitals, ensuring national security, paying salaries to civil servants, and much more.
As shown in Figure 1, Republican budget expenditures remain comparable to the previous year, which is a consequence of the high inflation of 2022-2023. In February 2024, there was a significant increase in expenditures compared to February 2023, mainly due to increased spending on “Social Assistance and Social Security,” “Interbudgetary Transfers,” “Debt Servicing,” and “General Government Services.” This increase is likely related to the reformation of the government at the beginning of the year.
Structure of Republican budget expenditures for the first half of 2024, million tenge
As shown in Figure 2, a significant portion of the Republican budget expenditures is taken up by interbudgetary transfers (26.1%) and social expenditures (25.6%). If we combine all the social expenditures of the country—”Social Assistance and Social Security,” “Education,” “Healthcare,” and “Public Order, Safety, Legal, Judicial, and Penal Activities”—their share would amount to 43.7% of all expenditures, confirming Kazakhstan’s status as a social state.
According to preliminary data from the Bureau of National Statistics of the Agency for Strategic Planning and Reforms of the Republic of Kazakhstan, the economy of the country for the first half of 2024 amounted to 51.9 trillion tenge, meaning that the expenditures of the Republican budget represented 20.4% of GDP. Overall, this is normal for our country, as historically, over the past 5 years, the share of budget expenditures to GDP has varied from 16.6% to 23.8%. However, the growth in budget expenditures directed towards consumption in the short term contributes to an increase in GDP, but in the long term, it may be difficult for the country to maintain this level of spending. This is confirmed by the fact that, by the end of 2023, 62% of GDP was formed from final consumption expenditures, and only 29.6% was formed from gross accumulation. In the long term, this may lead to significant increases in inflation and unemployment.
Thus, on the one hand, the current level of budget expenditures in relation to GDP in Kazakhstan is normal and may support economic growth in the short term. On the other hand, for long-term economic stability, it is important to focus not only on supporting consumption but also on increasing investments in gross accumulation to ensure the sustainable development of the country’s economy.
By Toqtasyn Bakbergen
Economist
