Kazakh Minister of Economy and Budget Planning: Interview with Reuters News Agency
ASTANA. June 4. KAZINFORM. Minister of Economy and Budget Planning of Kazakhstan Bakhyt Sultanov had an interview with Reuters News Agency. Kazinform disseminates the text of the interview refering to the Kazakh Ministry of Economy and Budget Planning. The Kazakh government's $25 billion anti-crisis package should help the Central Asian country avoid an economic contraction this year, Economy Minister Bakhyt Sultanov said in an interview. Some economists, including those of the International Monetary Fund, expect Kazakhstan's gross domestic product (GDP) to shrink this year for the first time in a decade as global demand for oil and metals, the key Kazakh exports, has sagged. "We are sticking to our outlook for this year -- one percent (growth)," Sultanov said. "We have just started utilising the funds disbursed last year and this year... This should affect (the GDP dynamic) with a certain lag," he added, referring to the government's $25 billion aid package for banks, companies and households. Sultanov said the government would review its forecast after the indicators for the first half of this year become available. The International Monetary Fund said last month it expected Kazakhstan's GDP to decline by 2 percent this year. Sultanov said the key risk to the government's forecast was a potential fall in the oil price. "(A price) below $40 (per barrel) would be critical," he said. "...We will have to cut some budget spending items." To reduce its vulnerability to commodity prices, Kazakhstan should diversify its economy and develop "a new economic core" of small- and medium-sized businesses, Sultanov said. Kazakhstan has long called diversification its key priority, but senior officials say the government has mostly failed to implement it in practice. TAX BREAKS, NOT CUTS The government has, however, introduced a new tax code this year that was meant to increase the burden on oil, mining and metals companies while cutting taxes for other sectors. Sultanov said it would not be reviewed despite the crisis. "A further reduction of taxes would lead to a sharp decline in budget revenues and will jeopardise meeting the state's social commitments," he said. Sultanov said oil and metals producers should instead seek tax breaks on an individual basis by proving their operations are not profitable under the current prices. A number of Kazakh metals producers have complained about losses, including the local unit of ArcelorMittal, the world's largest steelmaker, which said last week it would have to halt operations unless workers agree to pay cuts. ArcelorMittal, which employs 46,000 workers in Kazakhstan, said the local unit had lost $100 million in the first quarter due to the drop in demand for steel. "If a business decides to shut down production and stop selling (its products) because nobody is buying, the state cannot buy (to help a company), so ... we are taking indirect measures," Sultanov said.