NBK says tax reform yields limited budget revenue growth in H1 2026

September 10, 2026 at 03:56 PM2 min

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Kazakhstan's National Bank said the tax reform has had only a limited effect on state revenue, with the overall budget deficit widening to 3.2% of GDP in the first half of 2026. The non-oil deficit narrowed to 7.1% of GDP, but the bank warned that continued government spending pressure could require tighter monetary policy to meet the inflation target.

Key Facts

The overall state budget deficit widened to 3.2% of GDP in H1 2026, above the 2% target.
The non-oil deficit fell to 7.1% of GDP, below levels of previous years.
Tax revenues rose 5.7% in real terms in H1 2026, driven by VAT and mineral extraction tax.
The tax-to-GDP ratio edged up from 17.5% in H1 2025 to 17.7% in H1 2026.
Government spending as a share of GDP declined from 24.7% to 23.5% year-on-year.

Budget Deficit Dynamics

Kazakhstan's overall budget deficit reached 3.2% of GDP in the first half of 2026, exceeding the 2% target. The widening occurred amid a reduction in transfers from the National Fund. The non-oil deficit narrowed to 7.1% of GDP, below the levels recorded in previous years. The National Bank attributed the improvement to structural budget changes rather than cyclical factors, with the cyclical contribution close to zero.

Tax Revenue Performance

Tax revenues grew 5.7% in real terms in the first half of 2026. VAT and the mineral extraction tax were the main drivers, with VAT remaining the primary source of tax revenue growth. The tax-to-GDP ratio rose only marginally from 17.5% in H1 2025 to 17.7% in H1 2026. The National Bank said the effect of the tax reform on the revenue base remains limited.

Spending and Fiscal Pressure

Budget consolidation is being achieved mainly through the expenditure side. Nominal spending rose 11.7% year-on-year, but its share of GDP fell from 24.7% to 23.5%. Debt servicing costs continue to rise, reducing room for other spending under budget rules. The state is expanding quasi-fiscal financing, which is not reflected in the non-oil deficit, shifting part of the fiscal burden off-budget. The National Bank warned that persistent government spending pressure on aggregate demand limits the disinflationary effect of consolidation and may require tighter monetary conditions to achieve the inflation target.