Kazakhstan : Fiscal Governance and Financial Sector Reforms Program (Subprogram 1)

Finance / Money and capital markets

Public sector management / Public expenditure and fiscal management

1.The proposed effort to design and process a Kazakhstan Fiscal Governance and Financial Sector Reforms Program (the Program) aims to help the Government of Kazakhstan (government) address one of its core development challenges: heightened macroeconomic and financial vulnerability to external shocks. This medium-term development objective requires specific reform and institutional developments in fiscal management and in financial sector development. Under preparation since mid-2021 with an initially wider list of reform pillars (five) and proposals and the agreement to subsequently prioritize the subset of reform items with more agreement and progress, this approach was disrupted by the January 2022 political crisis in Kazakhstan and the political transition that ensued. The geopolitical and new economic realities set in motion by the Russian invasion of Ukraine in February 2022 also added further disruptions in the country's economic policy agenda during early-2022. At the request of Government, active discussions on the program resumed in May 2022, and momentum was regained with the new approval by the President of reform strategic directions along the then-already agreed two reform pillars of the program (and to which past preparatory dialogue had contributed).

2.The scope of the proposed two-subprogram programmatic assistance is fully consistent with the government's strategic priorities, with the forthcoming Asian Development Bank (ADB) country partnership strategy for Kazakhstan, and with the ADB Strategy 2030, namely three of its operational priorities. The proposed programmatic approach provides inherent and much-needed flexibility in medium-term reform directions while recognizing current achievements and formalizing medium-term reform commitments that are a primer for Kazakhstan.