Imagine you are managing a vast house where millions of people live. Every day they require food, clothing, education, healthcare, and other necessities.
To ensure uninterrupted access to these benefits, you must plan in advance how to meet their needs, which means creating a budget. On a national scale this type of budget is called as republican budget, and on the city level it is referred to as the local budget.
The republican budget is a plan in which the government decides how much money will be allocated for various needs of the country: building roads, schools, hospitals, providing aid to those in need, defense, and much more. Just like in a family budget, where we plan our expenses for groceries, utilities, and leisure, the state must carefully plan its income and expenditures.
The main sources of budget revenue are taxes, customs duties, and other fees. These revenues can be compared to family income (i.e. wages) or business income. This money is then distributed among various needs, much like deciding which part of the salary to spend on food and which part to save for a vacation or home repairs.
The republican budget plays a crucial role in the development of the economy and society. If funds are directed toward education and healthcare, it contributes to improving the living standards and well-being of the population. However, inefficient use of funds can lead to a budget deficit, similar to a situation where a family spends more than it earns and is forced to take out loans.
Understanding the mechanism of forming and distributing the republican budget helps to better comprehend why certain decisions are made at the government level and how they may affect the life of every citizen.
According to the Ministry of Finance of the Republic of Kazakhstan, in the first half of 2024, the revenues of the republican budget amounted to 8.7 trillion tenge. The main contributions to the budget were made by tax revenues (59.8%) and transfers (35.1%).
As shown in Figure 1, the revenues of the republican budget were particularly active in February and May, when the share of tax revenues increased. This is due to the periods of tax reporting and the fulfillment of tax obligations by companies. Tax revenues mainly consist of corporate income tax (CIT), value-added tax (VAT), and excises.
In the first half of 2024, tax revenues accounted for 59.8% of all budget revenues, or 5.2 trillion tenge.
As seen in Figure 2, the main growth in revenues is associated with an increase in VAT receipts in February and May. On average, from January to June 2024 CIT accounted for 32.4%, VAT for 40.2%, excises for 1.3%, and other taxes for 26.1%. The seasonality of tax revenues is explained by the fact that the deadline for VAT payment falls on the 25th day of the second month following the reporting period. Therefore, further growth in tax revenues can be expected in August and November 2024.
It is also worth noting the significant dependence of the budget on transfers from the National Fund. In the first half of 2024, the share of transfers in republican budget revenues amounted to 36.6%, equivalent to 3 trillion tenge, a significant portion of which was a guaranteed transfer from the National Fund.
Given the growing state expenditures and the increasing demand for social services, it is necessary to increase the revenues of the republican budget while reducing dependence on transfers from the National Fund. Otherwise, there is a significant risk of budget deficit growth, which may lead to the state failing to meet its obligations.
Toktasyn Bakbergen
Economist
