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Devaluation’s Impact on the Formation of Kazakhstan Government Budget: The Factor of the National Fund Investment Income

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  • Vyacheslav Yu. Dodonov

    (Kazakhstan Institute for Strategic Studies under the President of the Republic of Kazakhstan, NurSultan 010000, Republic of Kazakhstan)

Abstract

Depreciation of the national currency — economies with predominantly raw material exports included — is reflected not only in the indicators of the external sector, but also in the sphere of public finance, in particular the formation of budget revenues. In Kazakhstan, the impact of devaluation on the formation of the state budget is specific, associated with the presence of a special source of its income in the form of transfers from the sovereign wealth fund (National Fund). During the period of low oil prices, revenues to the National Fund from the oil sector decreased, and its accelerated spending began, which brought to the forefront investment income as one of the main source of its receipts. The high investment income in the Kazakh currency secures relative stability of the fund’s volume and transfers to the budget, but this income is largely formed due to the exchange rate factor. The weakening of the Kazakhstani tenge against hard currencies placed as the main part of the fund’s assets ensures an increase in the tenge investment income through their revaluation. The growth of investment income, in turn, produces increased volumes of transfers to the budget. Thus, the devaluation of the tenge has become a factor of stability in the formation of state budget revenues.

Suggested Citation

  • Vyacheslav Yu. Dodonov, 2021. "Devaluation’s Impact on the Formation of Kazakhstan Government Budget: The Factor of the National Fund Investment Income," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 3, pages 116-131, June.
    • Handle: RePEc:fru:finjrn:210309:p:116-131
    DOI: 10.31107/2075-1990-2021-3-116-131
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    References listed on IDEAS

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    More about this item

    Keywords

    devaluation; foreign exchange rate effect; government budget; Kazakhstan National Fund; investment income;
    All these keywords.

    JEL classification:

    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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