Public Finance - The Times Of Central Asia

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Shadow Economy

Kazakhstan Targets Further Reduction in Shadow Economy With AI-Driven Monitoring

Kazakhstan’s government has approved a 2026–2028 Action Plan to reduce the shadow economy through greater use of artificial intelligence and the digital tenge. The plan also calls for further digitalization in sectors most vulnerable to informal economic activity. The government hopes that the measures will reduce the shadow economy's share of GDP from 16.7% in 2025 to 13.8% by 2028, a decline of nearly three percentage points over the next three years. According to the Prime Minister's Office, Kazakhstan has already modernized 20 government information systems in recent years, dismantled the financial infrastructure supporting illegal online casinos with a turnover of approximately $4.2 billion, and prevented unjustified public spending totaling around $765 million. Officials said these efforts helped reduce the shadow economy’s estimated share of GDP from 24% in 2019 to 16.7% in 2025. "The main objective of the Action Plan is to reduce the shadow economy, ensure fair competition, increase business transparency, and boost budget revenues without imposing new obligations on entrepreneurs," the government said. A unified AI-powered monitoring platform will be central to the strategy. The system will combine data from government agencies to identify signs of hidden economic activity and flag risks in real time. Officials say this will help prevent violations before they cause budget losses. The plan contains 53 measures focused on improving economic transparency and accelerating digitalization in sectors with elevated risks of informal activity. The government has identified trade, construction, transport, agriculture, healthcare, and education as priority sectors for the new system. Retail trade will be another focus. The government plans to continue developing the Digital Bazaar, an electronic platform launched in late 2024 to bring Kazakhstan’s traditional markets and trading venues online. More products will be added to the mandatory digital-labeling system, while the National Product Catalogue will be extended. These measures are intended to make supply chains more transparent and curb counterfeit goods. They are also expected to create fairer conditions for businesses. Controls over excise goods and socially important products will be further automated. The government also plans tighter oversight of e-commerce platforms and online marketplaces, along with closer integration of state information systems. In the social sector, digital tools will be used to monitor the quality of services and track prices. They will also help authorities oversee public spending. The government plans to increase the use of the digital tenge, Kazakhstan’s central bank digital currency. It is already being used in selected government programs to improve the traceability of public funds. As previously reported by The Times of Central Asia, the digital tenge officially became a legally recognized form of Kazakhstan's national currency on July 18, providing the legal foundation for its broader use in government payments and public finance.

Economic Growth

Uzbekistan Raises 2026 Growth Forecast to 8.1%

Uzbekistan has raised its 2026 economic growth forecast from 6.6% to 8.1%, after stronger-than-expected performance last year and in the first quarter of 2026. The Ministry of Economy and Finance’s updated Fiscal Strategy for 2027-2029 projects nominal GDP of 2.183 quadrillion soums this year (about $180 billion). The revision follows growth of 7.7% in 2025, above the original 6.6% forecast, and an 8.7% expansion in the first quarter of 2026. The ministry expects market services to grow by 16.6% in 2026, industrial production by 8%, construction by 12.4%, and agriculture by 5%. Inflation is forecast to slow to 6.5%, while unemployment falls from 4.8% in 2025 to 4.5%. The stronger projection rests partly on domestic demand. The strategy expects non-gold exports to rise by 20%, capital investment by 12.9%, and remittance growth to remain around 10%. Separate Central Bank figures show that remittances rose 13% to $3.8 billion in the first quarter, helping to support household spending even as Russia’s share of transfers declined. Growth is forecast to slow to 6.9% in 2027, before rising to 7.1% in 2028 and 7.4% in 2029. Inflation is projected at 5-6% in 2027 and 5% in 2028 and 2029. The government also intends to keep the fiscal deficit within its rules and public debt below 40% of GDP. The Ministry of Economy and Finance says meeting these targets will require stronger tax administration, fewer ineffective exemptions, tighter oversight of public-private partnerships, and further action against the shadow economy. It also plans more transparent medium-term budgeting and closer scrutiny of fiscal risks. The success of those reforms will determine whether rapid growth can be sustained without weakening public finances. The fiscal strategy uses the IMF’s April global outlook as part of its external assumptions. The government’s estimate is considerably more optimistic than the IMF’s 6.8% forecast. In its June assessment, the Fund said Uzbekistan’s outlook remained favorable but warned that the economy could be running above its potential. It identified weaker global conditions and domestic overheating as the principal risks. The revised figures also strengthen the government’s claim that the Uzbekistan-2030 Strategy target of an economy worth more than $240 billion remains achievable. The plan relies on private investment, export growth, higher productivity, and continued macroeconomic reforms. Economist Otabek Bakirov said the 8.1% projection would mark the strongest growth in Uzbekistan’s recent history. “According to the Fiscal Strategy forecasts, economic growth will accelerate to 8.1% in 2026. If this happens, it will become a new record for the country’s recent history,” he wrote in an analysis of the forecast. In a separate calculation, Bakirov put nominal GDP above $205 billion in 2027, $228 billion in 2028, and $257 billion in 2029. On that path, the $240 billion target would be surpassed a year early. However, he cautioned that the scenario depends on maintaining strong growth, low inflation, and exchange-rate stability, without a major domestic or external crisis. A weaker soum would reduce the dollar value of GDP even if output continued to rise quickly...

Digital Tenge

Digital Tenge Receives Official Legal Status in Kazakhstan

Beginning July 18, the digital tenge will officially become a recognized digital form of Kazakhstan’s national currency. Amendments to the country’s legislation grant the National Bank of Kazakhstan the exclusive authority to issue and circulate the digital currency, establishing a comprehensive legal framework for its wider use across the financial system. Unlike many central bank digital currency (CBDC) projects around the world, which remain at the pilot or experimental stage, Kazakhstan has already moved beyond testing into practical implementation. Rather than replacing cash or bank cards, the digital tenge has been designed primarily to improve transparency in public spending, government procurement, and the monitoring of budget expenditures. By the beginning of 2026, approximately 336.6 billion tenge, or about $640 million, worth of digital tenge had been issued, and the technology had been deployed in more than 100 pilot projects. These include public procurement, the management of National Fund resources, tax administration, government subsidies, and infrastructure financing. Programmable payment technology enables authorities to track the movement of public funds almost in real time while restricting spending according to predefined conditions. The practical use of the digital tenge continues to expand. According to the National Payment Corporation of Kazakhstan, the platform was used throughout 2025 in projects involving infrastructure financing, public procurement, business support programs, and other government initiatives. The experience gained from these projects has laid the foundation for the next stage of the digital tenge’s development. Kazakhstan remains the regional leader in the development of a central bank digital currency. Elsewhere in Central Asia, governments have concentrated on digital payments and the regulation of digital assets. As previously reported by The Times of Central Asia, Kyrgyzstan is promoting the gold-backed USDKG stablecoin for cross-border transactions, while other countries in the region have yet to move toward the practical implementation of national CBDCs. The International Monetary Fund believes the next phase of the project will depend less on further technological development than on strengthening regulation, enhancing cybersecurity, and integrating the digital tenge into Kazakhstan’s existing financial architecture. According to the IMF, these factors will determine whether the project can be successfully scaled nationwide.