JPMorgan - KASE

Revenues
As a result of improved efficiency in tax administration, with the assistance of international
advisers, including the World Bank and the IMP, tax revenues increased in 1997 by 18 per cent.
compared to 1996. During 1999, tax revenues as a percentage of GDP decreased to 16.4 per cent.
compared to 16.8 per cent. in 1998. However, in 2001, tax revenues increased to 19.9 per cent. of
GDP. The Ministry of Finance attributes these increases to the impact of the new tax code and
improved tax administration. Of particular importance were the increases in property tax rates,
the extension of excise tax to further products, including crude oil and gas condensate and a
change of method of tax calculation.
Monetary and Financial System
Overview
Since mid-1994 Kazakhstan has adhered to a strict macro-economic stabilization program,
combining tight budgetary discipline, stringent monetary policy and structural economic reforms,
which has sharply reduced inflation and lowered interest rates. At the end of 1999, the
annualized rate of consumer price inflation was 18.1 per cent., giving an average rate for the
year of 8.3 per cent. There has been a significant overall decrease in the annualized rate of
consumer price inflation over the last five years, during which it fell from 1,158.3 per cent. at
year-end 1994, mainly as a result of co-ordinated policies by the Government and the NBK. The
devaluation of the tenge following its flotation in April 1999, however, caused inflation to rise in
1999 but by the end of 2000 the annualized rate of consumer price inflation had decreased to 9.8
per cent. giving an average rate for the year of 13.2 per cent. Inflation continued to fall in 2001
and the annualized rate of consumer price inflation decreased to 6.4 per cent., while the average
rate for the year was 8.4 per cent.
Monetary Policy
The main targets of the monetary policy are maintenance of low inflation rates, maintenance of
positive real interest rates and improvement of the quality of financial intermediation. The NBK
has stated that it expects to continue policies aimed at financial stabilization and long-term price
and exchange rate stability, as well as sustainable economic growth.
Currently, the NBK implements monetary policy through instruments such as regulation of
volume of credits to commercial banks; determination of the refinancing rate ; foreign exchange
market interventions; and Treasury bill operations, including repo and reverse repo operations. In
addition to the refinancing rate, the NBK also maintains Lombard and overnight rates.
In February 2002, the NBK introduced a repurchase rate (“REPO”) as a new tool to regulate
liquidity. The NBK currently establishes weekly overnight, seven day and 14 day REPO rates. After
the banks become accustomed to the instrument, NBK will start to establish a monthly official
REPO rate. On 7 February 2002, NBK established an indicative REPO rate at the level of 4.5 per
cent. annually for the attraction of money and 7.5 per cent. for the provision of money.
Currently, the NBK overnight rate is 9.0 per cent.
Money Supply
To counteract the effects of the financial crisis in Russia, a decrease in prices of main exported
raw materials and increasing expectations of devaluation, the NBK implemented a variety of
strict monetary and credit policies during the course of 1998 and 1999 aimed at preventing the
negative influences that such crisis might have on Kazakhstan’s financial system. In addition,
interest rates were raised from 18.5 per cent. to 25 per cent. The adoption of such policies
mitigated the impact of the crisis on Kazakhstan.
B-14