Kazakhstan’s Economic Paradox: High Growth Figures Mask Citizen Woes

President Kassym-Jomart Tokayev of Kazakhstan has issued a stern directive, tasking his government with recalibrating economic reforms to prioritize the welfare of ordinary citizens. On October 16, the President mandated Prime Minister Olzhas Bektenov to deliver a detailed action plan within 48 hours, focusing on bolstering small and medium-sized enterprises, enhancing the investment climate, and improving the nation’s overall economic health. While President Tokayev maintained that current economic policies align with Kazakhstan’s strategic interests, this official optimism sharply contrasts with the grim reality painted by local experts, who point to surging inflation, rising prices for essential goods and fuel, and a discernible decline in household incomes.

The strategic blueprint, which Prime Minister Bektenov is expected to unveil by the end of the current week, is set to serve as a comprehensive roadmap for transformational changes. This ambitious program, initially outlined by President Tokayev late last year, spans critical sectors from infrastructure modernization and energy development to digital transformation and the integration of artificial intelligence, promising long-term growth and increased prosperity for the populace.

In Washington, Vice-Prime Minister and Minister of National Economy Serik Zhumangarin recently presented a compelling case for Kazakhstan’s economic appeal to American business circles. He highlighted the nation’s robust GDP, projected to exceed $330 billion this year, accounting for nearly 60% of Central Asia’s total economy. Zhumangarin noted that the country’s per capita GDP surpassed $14,000 in 2024, with purchasing power parity reaching over $44,000. He affirmed Kazakhstan’s medium-term goal of achieving a $450 billion GDP by 2029.

Further bolstering the official narrative, Zhumangarin emphasized Kazakhstan’s conservative state debt-to-GDP ratio, standing at a mere 22.2%, or $61 billion. He proudly announced that over the past two decades, the country has attracted more than $400 billion in direct foreign investments, averaging over $20 billion annually. The Minister also proudly cited consistent economic growth above 5% for the third consecutive year: 5.1% in 2023, 5% in 2024, and a robust 6.3% during the first nine months of the current year.

However, this polished presentation of Kazakhstan’s economy, presented on the international stage, is increasingly seen as detached from the daily realities on the ground by local analysts. This divergence was implicitly acknowledged when President Tokayev recently convened his economic team to address the quality of economic growth and price stability, suggesting an underlying concern within the government itself.

Economists argue that the republic is grappling with a perplexing paradox: an official economic growth rate nearing 7% coexisting with a 13% inflation rate, a 10% hike in fuel prices, and an absence of tangible improvements in citizens’ living standards. The ambitious reform agenda, aimed at diversifying the economy, fostering entrepreneurship, developing non-resource sectors, and stabilizing finances, aligns with Kazakhstan’s long-term strategic interests, according to the President.

Rakhimbek Abdrakhmanov, an economic analyst at AlmaU Analytics, likens the Kazakh economy to a sprinter—capable of impressive bursts but lacking long-distance endurance. Despite official forecasts of a 7% growth, Abdrakhmanov contends that this growth is largely nominal, driven primarily by unprecedented state expenditures, which reached approximately $60 billion last year. He argues that this surge isn’t a reflection of genuine productive capacity or increased labor productivity, but rather an artificially stimulated expansion.

The analyst underscores that the diminishing inflow of petrodollars necessitates a shift from quantitative targets to qualitative economic transformation. With oil prices declining and transfers to the National Fund plummeting by 40% in the first half of the year compared to last, the traditional model of growth predicated on government spending is becoming increasingly unsustainable. Abdrakhmanov warns that Kazakhstan’s economy relies heavily on borrowed funds, casting doubt on the long-term sustainability of current growth. He points out that last year, a record $15.5 billion was borrowed to cover the budget deficit, with another $12.44 billion allocated to debt servicing. This pattern suggests that GDP growth is fueled by borrowing rather than internal sources, making repayment an increasingly complex challenge.

While the current strategy appears to prioritize quantitative targets—such as President Tokayev’s two-year-old goal of reaching $450 billion GDP by 2029—economists caution against an overreliance on artificial growth. With GDP already increasing by a third to nearly $300 billion in two years, the target seems within reach. However, experts liken this rapid expansion to an athlete on steroids, an exhausting and potentially unsustainable push to meet a presidential deadline, rather than organic development.

Abdrakhmanov warns of severe consequences if these borrowed funds are not effectively invested in projects that genuinely enhance economic quality and instead fall prey to corruption. Post-2029, Kazakhstan could face a sharp escalation in its credit burden, forcing future governments to seek new sources for debt repayment, likely through increased taxes on its citizens.

This precarious situation could be exacerbated by the new Tax Code, set to take effect on January 1, 2026, which proposes a higher VAT, progressive income tax, and a new ‘luxury tax’. The business community has already voiced concerns, predicting a “period of survival” marked by a more complex tax system, rising costs, and a significant blow to micro-businesses. The Ministry of National Economy, however, frames the projected closure of approximately 300,000 companies as a “natural market cleansing.” Against this backdrop, the real incomes of Kazakh citizens are declining, with over half of the workforce earning below the average wage and dedicating half their expenses to food.

Political scientist Daniyar Ashimbayev, in his Telegram channel, contends that the National Bank’s decision to raise the base rate from 16.5% to 18% in an effort to combat inflation will ironically only spur further price increases. He identifies several key factors impeding the desired outcomes: substantial monetary injections into the economy, a tariff policy that has significantly inflated costs across all sectors, and expensive green energy projects that demand higher tariffs to ensure returns. The pursuit of investment attractiveness, Ashimbayev argues, has inadvertently driven up prices for essential goods, services, and transportation.

Ashimbayev also highlighted the soaring energy consumption fueled by the growth of cryptocurrency mining and extensive digitalization. This occurs against a backdrop of existing power generation deficits, necessitating costly electricity imports. He concludes that capital outflow and burgeoning state debt are destabilizing the budget and balance of payments, revealing what he describes as a lack of financial acumen in governance. The expert notes that rising prices have eroded real incomes, compelling more citizens to take out consumer loans. Ashimbayev criticizes the government for focusing on the symptoms—such as credit—rather than tackling the root cause of inflation, asserting that the National Bank’s rate hike itself exacerbates costs and fuels price growth.