FISCAL POLICY AND MACROSTABILITY IN KAZAKHSTAN: ASSESSING THE PROCYCLICALITY OF EXPENDITURES

Resource-rich countries frequently exhibit fiscal behavior that reinforces economic fluctuations. This article evaluates the procyclicality of Kazakhstan’s public finances and examines whether recent reforms to fiscal rules and transfer arrangements – particularly those related to the National Fund and intergovernmental transfers – have improved the stabilization of expenditures. Drawing on harmonized annual (2000–2024) and quarterly (2002Q1–2024Q4) official data, we estimate the elasticities of revenues and expenditures with respect to the output gap and assess how these relationships evolve around major institutional changes. We find that revenues and expenditures are both procyclical, but the main transmission mechanism operates through the revenue side: revenue elasticities are persistently larger than expenditure elasticities. Episodes of reform coincide with a statistically significant reduction in expenditure sensitivity of roughly 0.08–0.12 percentage points, whereas revenue sensitivity shows little change. Current expenditures display stronger procyclicality than capital expenditures, and subnational budgets exhibit higher cyclicality overall – though this effect is attenuated when transfers follow stable, formula-based rules rather than discretionary supplements