EXECUTIVE SUMMARY

Purpose and Management

i. This 2025 Public Expenditure and Financial Accountability (PEFA) performance assessment report evaluates the public financial management (PFM) systems in Kazakhstan, comparing the results with previous assessments conducted in 2009 and 2018. The assessment aims to track progress and inform ongoing reforms to enhance the effectiveness of PFM in the country. The World Bank and Asian Develop­ment Bank (ADB), as part of the Development Partners’ support to Kazakhstan, initiated and commissioned the PEFA. Government ministries, departments, and independent agencies covering external audit and legislature were involved in the provision of infor­mation and discussions on relevant indicators under their ambit.

Methodology

ii. Using the 2016 PEFA methodology, 31 indicators with a total of 94 dimensions were assessed, providing the same coverage as the 2018 assessment. Data collec­tion covered fiscal years 2022, 2023, and 2024. The assessment was overseen by a team including World Bank and ADB staff and international and local consultants, ensuring quality and comprehensive oversight throughout the evaluation process. Key PFM enti­ties completed an initial assessment questionnaire and participated in workshops and discussions together with the PEFA team. The involvement of the PEFA Secretariat and Ministry of Finance senior management strengthened the assessment process.

PFM Context

iii. Kazakhstan's PFM system is centralized. The Ministry of Finance oversees budget preparation, execution, and public procurement. The National Development Plan until 20296 sets fiscal sustainability targets, focusing on reducing the non-oil deficit relative to gross domestic product (GDP). The Concept of Public Financial Management7 lays out the reform agenda to 2030, with a focus on performance-based budgeting and improved public investment management. 

Summary of Key Findings

Strengths

iv. Kazakhstan has shown notable progress in its PFM since the last assessment, with strengths such as robust information technology (IT) systems that support budget execution and cash management. 

• Legal and Regulatory Arrangements. Recent amendments to the Budget Code and Tax Code have enhanced fiscal transparency and accountability. 

• Aggregate Fiscal Discipline. Revenue and expenditure have remained stable, supported by effective revenue administration and timely payments. 

• Budget Execution. Budget execution is characterized by robust internal controls, ensuring expenditure is authorized and aligned with budgetary allocations. The Trea­sury Committee oversees the execution of the budgetary operations of the central government (BCG). The Integrated Information System of Treasury (IIST) commitment control module tracks expenditure against planned budgets. All expenditure is accu­rately recorded, with no significant arrears noted, indicating effective management of public funds. 

• Revenue Administration. The Tax Code describes taxpayer rights and obligations, ensuring transparency and fairness. Risk analysis software aids in identifying compli­ance risks for targeted audits. The low level of tax arrears is indicative of operational efficiency in tax collection. 

• Strategic Allocation of Resources. The links between medium-term expenditure budgeting and strategic plans have improved. However, the lack of economic classifi­cation at the budget preparation stage remains a challenge. 

• Efficient Use of Resources for Service Delivery. The adoption of key performance indicators (KPIs) has strengthened the links between resource allocation and service delivery 

• Internal Controls and Auditing. Managed by the Committee on Internal State Audit and the Supreme Audit Chamber, the internal control framework aligns with inter­national standards and ensures compliance with financial regulations. Almost 100 percent of central government expenditure is covered by internal audit, with high completion rates for planned audits. 

• Procurement Processes. The procurement regulation emphasizes transparency and competitive bidding. However, a high percentage of contracts are awarded through single-source procurement. Efforts are ongoing to improve competitive procurement practices. 

Weaknesses

v. Weaknesses persist despite actions being in place to address them. Weaknesses include

• Lack of publication of documents relating to budget and investment activities. The new Budget Code is addressing this and it is essential that these are actually imple­mented to ensure consistency with good practice. 

• The absence of economic classification at the budget preparation stage hinders the effectiveness of the budget process. 

• Not including the recurrent cost implications of investments in the medium term on an annual basis impacts budget effectiveness and weakens the medium-term budget. 

• Explanation of changes since the last and the current medium-term budget are made at the aggregate level rather than in greater detail. 

• The timeliness of the transfer of grants to SNGs weaken their ability to take sufficient time to prepare bids. 

• Monitoring of SNGs is limited since the legislation does not provide for the mandatory publication of audited reports. 

• There is a lack of a debt strategy which means that debt issues are not considered in the medium term and weakens the medium-term budget. 

• Not including interest rates and exchange rates forecasts weakens the macro-eco­nomic forecasts in the budget documentation. 

• Key performance indicators are developed but require improvement in terms of consistency and precision in specification. 

• There are insufficient performance audits that could assist in improving the quality and consistency of KPIs. 

• The significant size of single source procurement weakens the effectiveness of the procurement system. 

• The adoption of international accounting standards is ongoing and there remain many standards still to be incorporated into the accounting system. 

Impact of PFM performance on budgetary and fiscal outcomes

vi. The strengths and weaknesses with respect to the three main fiscal and budgetary outcomes are:

Aggregate Fiscal Discipline

vii. Revenue and expenditure outturns have not deviated significantly from that forecast. Strong revenue administration has ensured that revenues were efficiently collected. Treasury operations and cash management enabled expenditures to be managed within the available resources. Control of contractual commitments was effec­tive, and the timeliness of payments ensured no expenditure arrears. 

viii. The strong internal and external audit functions have enhanced fiscal disci­pline. In-year data is available to manage in-year spending, supported by the built-in instruments of control with good audit trails. The procedures to be able to access and use IT systems and the overall integrity of the processes have also ensured sound fiscal disci­pline. PFM reforms established targets for aggregate fiscal discipline in terms of overall debt and deficit to GDP levels. Monitoring and mitigation of fiscal risks are addressed through the fiscal risk report.

Strategic Allocation of Resources

ix. The chart of accounts caters to a multi-dimensional analysis of expenditure but the absence of economic classification at the budget preparation stage is a hindrance. There is linkage between the medium-term perspective in expenditure budgeting and strategic planning, and the program budget achieves results consistent the adoption of KPIs across service delivery ministries. KPIs require more consistent specification and would benefit from more performance audits being carried out. There is an emphasis on the overall fiscal strategy which lays the foundations for the budget. 

x. Investments are selected based on achieving strategic outcomes and economic analysis is used to generate the best return. Monitoring of the implementation of projects has ensured that what was planned is being delivered. The recurrent cost impli­cations of investments in the medium term are not factored into the budget process.

xi. Overall, most of the key tools for strategic allocation of resources (fiscal strat­egy, regular in-year reports on expenditure according to policy priorities, and regu­larized budget amendments and virement procedures) are in place. These cover the tools for planning and subsequently monitoring and controlling planned implementation. 

Efficient Use of Resources for Service Delivery

xii. The accountability mechanisms, supported by internal and external audits, are effective as counter checks on inefficient use of resources. The level of competitive bidding in the procurement system is very low, which may impact on the efficient use of resources. Performance targets and outcomes support the efficient use of resources in service delivery units, but more performance audits would enhance the process. On the revenue side, there is clear operational efficiency with effective tax collection and low levels of arrears that indicates the credibility of tax assessments and the principle of equal treatment of taxpayers.

Changes Since Previous PEFA

xiii. There are clear improvements since the last PEFA assessment, although some challenges remain. Across the 94 individual dimensions compared, 30 dimensions improved, six deteriorated, and 58 were unchanged. Improvements in dimension scores are spread across the three fiscal and budgetary outcomes: 13 in aggregate fiscal disci­pline; 11 in strategic allocation of resources, and six in efficient service delivery. This overall improvement in scoring occurred from a relatively high baseline achieved in 2018, which had five A scores and 11 B scores across 31 indicators. Figure 1 presents the indi­cators scores for 2024 PEFA and Figure 2 the indicator scores of both PEFAs to show the changes. 

xiv. Areas of slight decline relate to: 

• Fiscal discipline in revenue composition. This is as a result of difficulty in forecasting individual revenue categories. 

• Budget documentation. This may be due to over scoring in the previous PEFA. 

• Timing of in-year budget reports. There is slightly more time taken than in the previous PEFA. 

• Monitoring of SNGs. The requirement for local governments to publish audited financial statements has changed since the previous PEFA.

Conclusion 

xv. The PEFA assessment indicates that Kazakhstan's PFM system is well-struc­tured, with effective mechanisms for budget execution, revenue administration, and internal controls. Continuous efforts to enhance transparency and accountability are evident, although challenges remain in increasing the share of competitive procure­ment methods and enhancing public access to financial information. The implementa­tion of new reforms and adherence to international standards are expected to further strengthen the PFM framework in the future.