On January 28, Kazakhstan’s capital Astana hosted an expanded government meeting led by President Kassym-Jomart Tokayev. The event focused on the country’s socio-economic development in 2024, but this year’s discussion carried broader implications, addressing both domestic and international concerns.
Addressing Budget Constraints
From the outset, Tokayev made it clear that a key issue for his government is the state budget’s financial shortfall. Analyst Gaziz Abishev noted on his Telegram channel that the problem is not just a lack of funds but a long-standing habit – dating back to 2003 – of addressing challenges by simply increasing spending.
“There is no longer an oil windfall to revitalize the dry economy as there was 20 years ago,” Abishev wrote.
Adding to the uncertainty, Kazakhstan’s oil revenues face potential disruption from Donald Trump’s stated intention to drive down global hydrocarbon prices.
Tokayev outlined a range of measures to fill budget gaps, urging his government to take bold, unconventional steps. He called on officials to act in the country’s best interests without fear of pressure from the Anti-Corruption Service or public opinion. He also stressed the importance of depoliticizing economic partnerships, particularly with Russia and China, cautioning against allowing Russophobic or Sinophobic rhetoric to interfere with business deals.
“Money must be attracted from abroad, and this is more important than ever. Without investment, we cannot sustain ourselves. Money doesn’t smell, but it disappears. We need to attract investment from all sides – within the law – without falling into populism. The future of the national economy, and to some extent the country as a whole, is at stake,” Abishev commented.
Public Reaction to Tax Reforms
Although tax reform was only the sixth of eight key points in Tokayev’s speech, it quickly became the most widely discussed issue among the public.
Kazakhstan’s value-added tax (VAT) is currently 12%, with a sufficiency threshold of 78 million tenge ($150,937). The government is considering raising the VAT rate to 20% and lowering the sufficiency threshold to 15 million tenge ($29,026). If implemented, nearly all small businesses would become VAT payers, while the increased tax rate is expected to drive inflation. The government maintains that inflation will not exceed 4.5%, but Tokayev’s mention of “belt-tightening” has already led many to expect rising retail prices.
To offset the burden on businesses, the government proposes eliminating mandatory employer pension contributions and reducing the social tax.
However, Tokayev himself expressed reservations about cutting the social tax, emphasizing that regional governors (akims) need financial incentives.
“Think again. I believe it would be wrong to deprive akims of incentives, especially financial ones. After all, the regions are the country. Find a solution. We will meet again to discuss these issues,” he told the government.
The tax reforms will also be debated in Parliament, where the lower house is currently reviewing the draft of the new Tax Code. The government will have to negotiate with members of the Majilis and Senate over the VAT rate, sufficiency threshold, and other sensitive issues.
Messages to Foreign Partners
Tokayev’s speech contained several key messages aimed at international audiences, particularly in the West.
One recurring theme was the need for Kazakhstan to focus on technological partnerships with China, particularly in water conservation, IT, and artificial intelligence. Tokayev highlighted the success of the DeepSeek startup, suggesting that western firms are losing the technological race in Central Asia.
Another major announcement concerned Kazakhstan’s nuclear energy sector. The president confirmed that three nuclear power plants will be built, instructing the government and the Samruk-Kazyna sovereign wealth fund to develop long-term strategies for the industry’s growth.
In response, Russian media outlets have speculated about Kazakhstan’s potential interest in developing nuclear weapons. Russian analyst Anatoly Nesmiyan noted that Kazakhstan may reconsider its non-nuclear status due to regional security concerns.
“The precedent of Ukraine – where the Budapest Memorandum proved to be a mere piece of paper – combined with a northern neighbor that has a peculiar view of friendship and good-neighborliness, and periodic claims over Kazakhstan’s territory, naturally raises the question of whether Kazakhstan should regain nuclear weapons. For now, this remains hypothetical, but who knows…” Nesmiyan wrote.
Regardless of such speculation, the competition for contracts to build Kazakhstan’s nuclear power plants is nearing its final stage, and Tokayev signaled that decisions will soon be made.
Renegotiating Production-Sharing Agreements
One of the most consequential parts of Tokayev’s speech was his hint at renegotiating production-sharing agreements (PSAs) under the framework of subsoil use reforms.
“The implementation of production-sharing agreements for large fields has allowed Kazakhstan to become a reliable supplier of energy to the global market. These projects have made a great contribution to the country’s socio-economic development. However, large investments require a long-term planning horizon. Therefore, the government must intensify negotiations on extending PSA contracts, possibly on revised terms that are more favorable for Kazakhstan,” Tokayev said.
For years, the Ak Zhol parliamentary faction has called for the declassification of PSA contracts, but in Kazakhstan, these agreements have remained as closely guarded as U.S. government files on the Kennedy assassination.
Tokayev’s remarks send a clear signal to American and European companies that he is prepared to bring these contracts into the public domain. By doing so, the government could cite public pressure as a justification for renegotiating PSA terms on conditions more advantageous to Kazakhstan.
