IMF Highlights Overheating Risks in Kazakhstan’s Economy, Recommends Stronger Policy Measures and Structural Reforms
The International Monetary Fund (IMF) has cautioned that Kazakhstan’s robust economic growth in 2025 shows clear signs of overheating, urging the authorities to adopt tighter and better-coordinated macroeconomic policies, maintain monetary restraint, and accelerate structural reforms to ensure sustainable growth.
The IMF Executive Board completed its annual Article IV Consultation with Kazakhstan, a process through which IMF staff conduct bilateral discussions with member countries to review economic developments, policies, and financial stability, the IMF reported.
Kazakhstan’s economic expansion has been driven by rising oil production and strong activity in non-oil sectors. Elevated domestic demand, supported by an expansionary public-sector stance, has contributed to inflation exceeding target levels. While the banking sector remains resilient amid rapid consumer credit growth, medium-term projections indicate that economic growth is likely to moderate to around 3.5%, with inflation gradually declining toward the 5% target by 2030.
The IMF noted that the National Bank of Kazakhstan continues to implement a tight monetary policy amid persistent inflationary pressures. However, planned fiscal consolidation in the 2026 state budget may be partially offset by expanding quasi-fiscal operations of state-owned enterprises, sustaining an overall loose public sector stance. Ongoing progress in implementing the 2023 Financial Sector Assessment Program (FSAP) recommendations and prudential measures is expected to continue supporting financial stability.
Executive Directors recognized the resilience of the Kazakh economy but highlighted persistent challenges, including high inflation, a widening current account deficit, and a large state footprint constraining private sector development. They stressed the need for a restrictive, well-coordinated macroeconomic policy mix and accelerated implementation of structural reforms.
Key recommendations included:
- Maintaining a tight monetary policy until inflation aligns with the target.
- Enhancing liquidity management and ensuring effective fiscal consolidation.
- Limiting off-budget activities of state-owned enterprises and strengthening the fiscal framework.
- Continuing implementation of the 2023 FSAP recommendations, enacting the new Banking Law, and improving regulation of digital assets.
- Accelerating market and governance reforms to reduce state dominance, promote private sector activity, and strengthen legal protections, property rights, and anti-money laundering/combating the financing of terrorism (AML/CFT) measures.
Photo credit: AFP
