04/17/2009, 00.00
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Global crisis forces Kazakhstan to cut 2009 budget

The drop in exports and the collapse of prices for oil and metals, among the country's main products, is reducing public revenue. The government pledges not to cut salaries and social services. But inflation, projected to be 11%, is causing increasing difficulty for the population.

Astana (AsiaNews/Agencies) - The upper house (Senate) of Kazakhstan approved, on April 8, a sharp cut to the projected 2009 budget, which was approved just last December. The government says that the new anti-crisis austerity measures will not include cuts to essential services, but analysts observe that high inflation would instead require a rise in spending for social services.

The new budget projects a rise of just 1.1% in the 2009 gross domestic product, after an increase of at least 2.7% was expected in December. The crisis has had a significant impact on the country, which for years has seen its GDP increase by 8-9% per year.

The slowdown in growth is due to the collapse in exports and the lower global prices for metals and oil (oil has fallen to 40 dollars per barrel, from 150 dollars in August). Oil is one of the country's leading resources. The construction industry has also come to a standstill after the boom in recent years, dried up by the drop in bank financing. The situation has been aggravated by rapid inflation, estimated at around 11%, especially as a consequence of the recent devaluation of the local currency (the tenge), which has led to a spike in prices for many imported goods.

The new state budget projects a drop in public revenue of about 20%, compared to estimates from December. Minister for Economy and Budget Planning Bahyt Sultanov says that the new budget increases social spending, with the creation of jobs and provision of financing for university students, and that the cuts will not affect sectors like salaries, pensions, and social benefits. But wages are already low, and the rapid inflation is seriously eroding buying power. The minimum pension of 9,800 tenge (about 65 U.S. dollars) is lower than the legal minimum wage, and not nearly enough to live on.

On the other hand, other economists maintain that the cuts are insufficient, and comment that Astana is pledging to spend money that it does not have, possibly counting on an unlikely rise in the price of oil and metals for export. The government recently told state companies (like the public holding company Samruk-Kazyna) to cut jobs, and has frozen salaries for all of 2009. The job losses are even more serious considering the crisis in the private labor market.

The crisis is also putting a damper on Astana's ambitions to position itself as a regional leader. One of the main spending provisions in the 2009 budget is for the creation of installations and infrastructure to host the 2011 Asian Winter Olympic Games: this could be a source of jobs, and could benefit the country's image, but in the meantime it requires an adequate economic commitment.

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