President Kassym-Jomart Tokayev of Kazakhstan has completed one year in office. It is an important milestone. Nearly half of this period was spent in the shadow of Covid-19.
By now, the experts and analysts are unanimous in their opinion that the world will never be the same again. The social, cultural, trade-economic, and industrial norms are going to change drastically. There will be marked difference between the old normal and the new normal.
The Covid-19 is a composite challenge: The coronavirus itself is able to propagate dangerously fast although the fatality rate is lower compared to the other strains of similar viruses. On the other hand, its impact on life and economy is already dramatic and will continue to be so for a long time. —– In other words, dealing with Covid-19 is one challenge, and dealing with the consequences of Covid-19 is quite another challenge.
The ways and means to deal with the pandemic itself are in the domain of the medical community. A politician can only provide them with the material and legal support in doing their job. Nonetheless, the economy is dependent on the decisions of the politicians; as such the real test of leadership is in the treatment of economic aspects of this pandemic.
Sound judgment, backed by the ability to envision different scenarios, is required to take such decisions that will minimize the impact on the economy, and create the conditions for the quick and painless recovery of economy in the Post-Covid period.
At present, most of the countries of the world are bogged down with the ravaging pandemic i.e. the number of people infected, the percentage of fatalities, the ratio and period of recovery, etc.
The attention is turning slowly to the economic revival, and every country has to chart its own course because no two countries are exactly alike as far as the road to economic recovery is concerned.
It is important here to picture the concept of ‘economic recovery.’
When we describe the quest as ‘economic recovery,’ we risk associating it with the idea of material, impersonal greed.
In order to de-warp the point, let’s put it in stark terms: Should the people die from the pandemic or should they die from hunger?
This is an extreme question but it underlines the importance of: 1. Immediate economic damage control; and 2. Preparedness for economic recovery.
The entire system that is called economy must work to make sure that the people are fed, clothed, educated, provided with medical treatment, and all the amenities and comforts of quality life.
The decisions of President Tokayev of Kazakhstan and his administration in economic damage control and preparedness for recovery have earned praise of international institutions and observers.
It is pertinent here to register that the success of leadership is an inclusive and participatory process. A leader can only succeed when the nation is behind him. The success of Tokayev and his team is the success of every Kazakhstani.
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KPMG, a global network of professional firms providing audit, tax and advisory services, with an industry focus, published a short report on 11 May 2020, commenting on Kazakhstan’s response to Covid-19.
“The government has announced its preparedness for a potential crisis caused by the virus. A total package of anti-crisis measures, excl. tax relief/deferral measures and support on a local level, is expected to reach approx. KZT4.4 trillion,” says the report.
One US dollar is about 400 tenge.
The report notes that a temporary reduction of VAT on agricultural and food products and zero customs duties on essentially imported items have been put in place.
In other measures, the president has donated 500000 medical masks to the hospitals, orphanages, and vulnerable groups. Construction of three quarantine modular complexes in Nur-Sultan, Shymkent, and Almaty has been funded with KZT 14.8 billion. The rental payments of state property have been waived off until 20 June 2020.
A bonus of 20 minimum salaries is given to workers in very high risk environment, 10 minimum salaries to workers in high risk environment, and 5 minimum salaries to workers in medium risk environment.
Additionally, one salary will be paid to doctors, police officers and other specialists who perform their duty in the fight against coronavirus – KZT8 bn.
Preferential loans: a total of KZT600 bn, for 1 year, at 8%. To support SMEs that suffered from coronavirus, the National Bank in cooperation with Agency for regulation and development of financial markets are initiating concessional lending to support SMEs’ working capital. Combined with “Economy of Common Goods” program, the support received by local entrepreneurs from the government will reach KZT1 tn.
Agricultural sector support: farmers will get access to loans with the total amount of KZT70 bn at 5% available through National Holding Kazagro and KZT100 bn at 6% through “Economy of Common Goods” program. In addition, farmers will be able to finance their operations through forward contracts (under its future harvest). Also, diesel and other fuel types will be subsidized for the next sowing season.
Oil refineries are exempt from excise tax on exported gasoline and diesel fuel until 31 Dec 2020.
SMEs are exempt from personal income tax and social payments (social tax and insurance) for 6 months (Apr-Sep.) Sectors include but not limited to tourism, transport, IT, consulting, private education, private healthcare and other affected sectors.
Monthly payments: during the state of emergency one minimum monthly wage (KZT42,500) is paid to citizens who had lost their income because of the state of emergency. Approx. 3 mln citizens could expect this compensation.
All pension and benefit payments will be raised by 10%. A total of KZT200 bn is expected to be spent on the initiative.
About 800000 citizens from vulnerable groups will be provided with food packages.
Reimbursement of utilities expenses for Apr and May in amount of KZT15,000 will be provided for some socially vulnerable groups of population.
Extension of uninsured citizens’ access to healthcare under obligatory social medical insurance system from 1 Apr to 1 Jul 2020 is granted.
KZT39.1 bn allocated to finance measures to prevent the Covid-19 spread and purchase vital food for population, including KZT23.5 bn – for ongoing anti-epidemiological measures.
Value-added tax was reduced from 12% to 8% for socially significant food products until 1 Oct 2020.
Kazakhstan Government and institution measures in response to COVID-19
KPMG, 11 May 2020
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Fitch Ratings has acknowledged that the Coronavirus will have limited impact on the GRE (Government Related Entity) Ratings of Kazakhstan.
“Fitch Ratings does not expect the coronavirus outbreak to have an immediate negative impact on Kazakh government-related entities (GREs), as the state has substantial capacity and retains sufficient incentives to provide extraordinary support to its GREs, if needed,” says their report issued on 15 April 2020.
It says, “All GREs rated by Fitch in Kazakhstan benefit from strong links to the Kazakhstan state, leading to a high likelihood of exceptional state support in the event of financial difficulties. The entities’ GRE scores are high enough to justify the application of a top-down rating approach towards their ratings. This is due to the state’s strong control over the entities and the negative sociopolitical and financial consequences of their potential default.”
Fitch rates nine public entities in Kazakhstan based on its “Government-Related Entities Rating Criteria”, including three national management holdings: Sovereign Wealth Fund Samruk-Kazyna JSC (BBB/Stable), JSC National Management Holding Baiterek (BBB/Stable), KazAgro National Management Holding JSC (BBB/Stable). The other rated entities are Kazakhstan Sustainability Fund Joint-Stock Company (BBB/Stable), and several national management holding subsidiaries: JSC National Company Kazakhstan Temir Zholy (BBB-/Stable), JSC Agrarian Credit Corporation (BBB-/Stable), KazAgroFinance JSC (BB+/Stable), Kazakhstan Mortgage Company (BBB-/Stable) and Samruk-Kazyna Construction JSC (BB+/Stable).
Coronavirus Outbreak Has Limited Impact on Kazakh GRE Ratings
Fitch Rating, 15 April 2020
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Ariel Cohen, in an article for the Atlantic Council, writes that according to the deputy chair of Kazakhstan’s National Bank, Aliya Moldabekova, the Bank’s reserves of around $57.5 billion was enough to help Kazakh citizens and businesses in quarantine-mode.
“As of April 16, the direct payments of $100 (KZT 42500) to the vulnerable population cost at least $270 million, one of the boldest steps the government has undertaken to combat the social fallout. The government has also extended tax incentives measures that would benefit more than 700,000 companies and individual entrepreneurs and would allow them to save about KZT 1 trillion (more than $2 billion). Additionally, President Tokayev assigned the government and National Bank to develop economic growth rehabilitation package to help the worst hit industries by May 11,” he writes.
He adds that Kazakhstan is better positioned to deal with the crisis than its neighbors given the relative strength of its economy and gradual healthcare sector improvements over the past decade.
COVID-19 pandemic puts Central Asia’s resilience to the test
New Atlanticist by Ariel Cohen
Atlantic Council, 4 May 2020
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Gulnur Bekmukhanbetova, in a report for Baker McKenzie, writes: On 20 May 2020, the Government of Kazakhstan approved a Comprehensive Plan for the Recovery of the Economy through the End of 2020 (the “Recovery Plan”). The Recovery Plan provides for certain stabilization and support measures for businesses worth approximately USD 13.4 billion, including the following:
- credit facilities, subsidies and guarantees for small- and medium-sized enterprises (“SMEs”), as well as larger companies in certain priority (and eligible) industries;
- deferral on loan repayments from banks and subsidized loans for SMEs; and
- fiscal relief, including exemption from payroll taxes, property tax and land tax, as well as a reduced rate of VAT for “essential food products.”
In summarizing her short but fact-filled report, Bekmukhanbetova writes: “The Recovery Plan relies on traditional instruments, such as loans and guarantees, to support companies in the real economy. Those instruments predominantly target smaller companies, although certain opportunities may exist for larger companies operating in priority (eligible) sectors.”
The Kazakhstan Response to the Financial Impact of COVID-19
Baker McKenzie – Gulnur Bekmukhanbetova
Lexology, 1 June 2020
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Quite clearly, the policies and actions of President Tokayev of Kazakhstan and his team are aimed at easing the pain of the population during Covid-19, minimization of damage to the economy, and viable planning for the economic recovery after the pandemic. /// nCa, 9 June 2020