Will Kazakhstan cut on social spending amid sliding oil prices?

Experts have shared opinions about the effect that $80 per barrel oil prices are likely to have on Kazakhstan's budget, Tengrinews correspondent reports.

On October 17, Kazakh Vice PM Bakytzhan Sagintayev said: “We see oil prices falling worldwide. If I am not mistaken, yesterday the price stood at $82-83 per barrel. Therefore we are revisiting the 2015 budget based on the oil price of $80 per barrel.”

He added that that if the global prices continue sliding, the government might revisit the budget planning based on the oil price benchmark level of $60 per barrel.

Experts are divided on how the government is going to handle the deficit in the state budget. Some, like the head of the Central Asian Foundation for Democracy Tolganai Umbetayeva, believe that the cuts will hit social spendings. Others, like deputy chairman of Kazakhstan Public-Private Partnership Center Galymbek Mamrayev, believe that social spendings “certainly won’t be cut”.

"If it will have any effect, it will be felt in the social sphere. It is unlikely that there will be cuts in other areas. Other programs are unlikely to be reduced. Besides, you see, the Russian ruble is still falling. This is a very strong signal for us. Of course, Russia is promising to support the ruble but international experts doubt it. We (Kazakhstan and Russia) are connected very tightly," Umbetaliyeva said.

Mamrayev’s opinion is diametrical. He thinks that social spending is that which the government is not going to cut. Rather, it is investments that the government will have to reconsider.

"Social spending, spending to support the population certainly won’t be cut. There are all the necessary reserves in place. Even amid the current oil prices these obligations can be easily fulfilled. All the investments will be divided into levels of priority during the adjustment of the state budget," he said.

He added that oil prices in 2015 were expected to rise back to $100 per barrel, which would allow Kazakhstan to implement its projects later, in 2015 and after.

Contrary to this belief, head of the Center for Analysis of Social Problems Meruert Makhmutova believes that such hopes are futile.

“The government might compensate the declining budget revenues by increasing transfers from the National Fund into the state budget or by cutting spendings,” she noted. “One shouldn't cherish hopes that the oil prices would go back above $100 per barrel in 2015.”

Both Makhmutova and Umbetaliyeva consider oil prices falling below $76 per barrel quite possible.

Writing by Dinara Urazova, editing by Tatyana Kuzmina