Kazakstan: Economically Successful, Socially Unequal

CABAR

The Central Asian Bureau for Analytical Reporting is a project of IWPR

Thursday, 20 January, 2022

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Kazakstan’s wealth is in full display in Aktau. Originally a Soviet city built around uranium mining, the expanse sprawling along the Caspian Sea shore is today at the core of the country’s oil and gas industry.

But the city’s vast riches are not enjoyed by all its inhabitants.

Aina Akisheva, a 56-year-old cook, makes 200,000 tenge a month (458 US dollars) - most of which goes towards buying food.

“We take loans and micro loans from salary to salary…We do not live, we simply exist,” she said. “My house was repossessed because I could not pay off the mortgage. We are renting an apartment now. Banks steal from ordinary people, entrepreneurs set prices of products themselves. No one regulates anything.”

Kazakstan has outperformed its neighbours since gaining independence in 1991. It sits atop vast reserves of oil, gas and precious metals and is the world’s biggest producer of uranium. Economic growth, however, has been uneven and grappling with debt has become a common battle for ordinary people.

The average salary is about 600 dollars and creeping devaluation of the national currency, coupled with rising prices, has entangled millions in microloans, loans and instalment plans to shore off inflation and compensate weak wage growth. For most people, loans have become a necessity to cover basic needs including healthcare.

Financial hardships inflamed the resentment that in early January sparked protests over a spike in fuel prices in Zhanaozez, a city of 90,000 about 140 kilometres east of Aktau. The protests spread from western Kazakstan to engulf the whole country, developing into the worst unrest for decades.

Foreign corporations and a small elite control most natural resources in Kazakstan. A 2019 report by the financial service firm KPMG showed that 162 individuals owned about 50 per cent of the country’s wealth. Economic experts note that authorities have invested revenues in glitzy visibility projects instead of much-needed infrastructural and social programmes.

“About 565 billion tenge (1.29 billion dollars) were spent over five years to prepare the international exhibition Expo-2017,” said economist Arman Zholamanov, lamenting the fact that these funds had not instead been invested in much-needed infrastructure.

“Almost everything is exported,”” he continued. “There are no [processing] plants, no diversification of the economy. This has impoverished the population.

In 2020, the country’s gross domestic product (GDP) declined for the first time in two decades. While the economy got back on its feet in 2021, expanding by 3.5 per cent in the first ten months, Kazakhstan did not recover from the five per cent drop oil production volumes of 2020, recording zero recovery last year.

Inflation has been steadily increasing and has jumped since the pandemic, exceeding the target band of four to six per cent set by National Bank of Kazakstan (NBK). In October, it reached a five-year high of 8.9 per cent, driven mostly by food prices.

As prices have climbed, unemployment has also risen with an estimated 4.2 million people losing their jobs in 2020.

“The unemployment rate jumped to 46 per cent, an unprecedented shocking level in our history,” Aikyn Konurov, a deputy in the parliament’s lower house, told IWPR. “The current crisis is not only a public health emergency but also a work one. Microloans to individuals grew by 145 per cent, and their loan arrears increased by 332 per cent.”

Taxi driver Miras Kazbergenov, originally from the village of Shubar in the Almaty region, moved to the capital Nur-Sultan in search of work to support his large family. Inflation has been eroding the 500,000 tenge (about 1,146 dollars) he earns on average each month. It’s never enough, he said.

"I have six microloans and two more loans at the bank,” the 34-year-old told IWPR. “We were told that there would be a repayment freeze and we would not need to pay. But the reality was different.”

The pressure to repay such loans can have deadly consequences. In November 2021, a mother in Almaty killed herself along with her three young children. The woman had three loans pending repayment – one of them amounted to 15,000 tenge (34 dollars).

Little trust in the government, nepotism and high levels of corruption have left Kazaks angry and disillusioned. Kaiyrbek Arystanbekov, who heads the Institute of Economic Policy in Nur-Sultan, warned that despite the country’s resources, vast sums had circumvented the national budget. He noted that between 2018 and 2020, Kazakstan officially purchased commodities from China for about 18 billion dollars, but the figure Beijing provided was twice as much - 36 billion dollars. 

“In two years, commodities for 18 billion dollars were not handled; it means that the budget received no revenues,” he said.

In 2019, then newly-elected president Kasym-Zhomart Tokayev advanced the notion of the “listening state,” which “quickly and efficiently responds to all constructive citizen requests”. The call for structural reforms, including from international financial institutions, has however remained largely theoretical. 

A 2021 government roadmap laid out efforts to stabilise the prices of essential products through measures like price caps, cuts in utility bills and a loan amnesty. These measures were not enacted, and the 2022 budget makes no mention of them.

Following January’s unrest, Tokayev admitted that society was highly unequal and accused the first - and for 30 years the country’s only - president Nursultan Nazarbayev of feeding a system of oligarchs.

“Because of the former president, a group of very profitable companies and a class of very rich people emerged,” Tokayev said in a video statement to parliament on January 11.

As part of measures to address the economic divide, Tokayev has demanded oligarchs, banks and business representatives to contribute to a public fund established for the reconstruction following the protests.

Since Tokayev’s speech, all three of Nazarbayev's sons-in-law have resigned from senior positions at state companies and a business lobby group, with the ex-president's nephew dismissed from his leading position on the National Security Committee.

Nazarbayev, addressing rumours that he had fled abroad, broke his silence in a short video released on January 18 in which he said that since handing over the power to Tokayev, he has been “a pensioner” and was living in retirement in the Kazak capital.