The Kazakh government is cutting jobs at state companies and imposing a hiring freeze until the end of the year as it tries to limit spending to compensate for the economic downturn.
Prime Minister Karim Masimov said on April 1 that the state holding company Samruk-Kazyna would reduce its workforce by half and cut pay by 30 percent.
Anna Walker, an expert on Central Asia's economies at the Economics Intelligence Unit in London, discussed the significance of these steps with RFE/RL correspondent Charles Recknagel.
RFE/RL: Until now, the Kazakh authorities have often sounded fairly upbeat in their public assessments of the country's economic strength in the face of the global economic crisis. That is partly because the country has the largest reserve fund in Central Asia for easing some of its impact. But the spending cuts seem to be send a different message. How unexpected are they?
Anna Walker: I think the scale of it is unexpected. Certainly it has been known that the government would face a very difficult year in terms of its budget, particularly with oil prices being so low, roughly $50 a barrel now compared to about $150 in July last year. Now, the government did draw up its budget based on a $40 a barrel oil-price scenario, but I think the longevity of the global economic and financial crisis has really started to affect Kazakhstan.
RFE/RL: As you mentioned, Kazakhstan had already recalculated its state budget for 2009 to 2011 at $40 a barrel, or about a third less than what the government had been hoping to earn over the next three years. Do these latest steps fit into an effort now to safeguard the government's reduced budget estimate?
Walker: They already stated earlier in the year that they would start cutting, or put on hold, a lot of the infrastructure projects that were planned. I am sure there was the hope that they would manage to keep current spending for wages and pensions and things stable. But, clearly, public-sector wages and public-sector employment is an easy thing to target, but it will have implications for people's perceptions of the government.
RFE/RL: What is likely to happen to the people who are cut from public employment. Do they have much prospect for finding other work?
Walker: We've already seen the rate of unemployment and the number of unemployed have been rising in the last few months after many years of quite a gradual, steady decline. Now, so far, this had been mainly confined to the private-sector employment, so companies like construction firms have had to lay off workers. But the fact that this has now moved to the public sector is of great concern, particularly as there are obviously very few jobs these people can easily go to afterward, because it is not as if the private sector is actually taking on new workers, they are laying off workers, too.
Political Risk Management
RFE/RL: Is there much political risk for the government in taking steps that will add to the country's unemployment rolls?
Walker: It will certainly have a notable impact on the government's popularity ratings. Now whether that means that President [Nursultan] Nazarbaev will try to change the composition of his government to try to be seen to do something is another matter. It is not clear who he would be able to put in place to successfully prevent public opinion from turning too strongly against him personally. He must be feeling there is a great risk that his record of successful growth is being dinted very severely.
RFE/RL: Finally, Kazakhstan also is confronting its economic downturn with a bank-rescue package and a stimulus plan. What do the government job cuts tell us about the progress of those efforts to fight the crisis so far?
Walker: They still have pretty large reserves in the oil fund and the national bank has some fairly large foreign-currency reserves. They have already been drawing down on these to finance some of the stimulus packages.
Now it is certainly not clear that these have had any effect yet, but I don't think we would expect to see any immediate effect and it has only been a couple of months. But the fact that they are laying off people, not just working in government departments but also in key companies in the economy effectively owned by the Samruz-Kazyna Fund, suggests that the stimulus package in its current form is not having much impact.
Prime Minister Karim Masimov said on April 1 that the state holding company Samruk-Kazyna would reduce its workforce by half and cut pay by 30 percent.
Anna Walker, an expert on Central Asia's economies at the Economics Intelligence Unit in London, discussed the significance of these steps with RFE/RL correspondent Charles Recknagel.
RFE/RL: Until now, the Kazakh authorities have often sounded fairly upbeat in their public assessments of the country's economic strength in the face of the global economic crisis. That is partly because the country has the largest reserve fund in Central Asia for easing some of its impact. But the spending cuts seem to be send a different message. How unexpected are they?
Anna Walker: I think the scale of it is unexpected. Certainly it has been known that the government would face a very difficult year in terms of its budget, particularly with oil prices being so low, roughly $50 a barrel now compared to about $150 in July last year. Now, the government did draw up its budget based on a $40 a barrel oil-price scenario, but I think the longevity of the global economic and financial crisis has really started to affect Kazakhstan.
RFE/RL: As you mentioned, Kazakhstan had already recalculated its state budget for 2009 to 2011 at $40 a barrel, or about a third less than what the government had been hoping to earn over the next three years. Do these latest steps fit into an effort now to safeguard the government's reduced budget estimate?
Walker: They already stated earlier in the year that they would start cutting, or put on hold, a lot of the infrastructure projects that were planned. I am sure there was the hope that they would manage to keep current spending for wages and pensions and things stable. But, clearly, public-sector wages and public-sector employment is an easy thing to target, but it will have implications for people's perceptions of the government.
RFE/RL: What is likely to happen to the people who are cut from public employment. Do they have much prospect for finding other work?
Walker: We've already seen the rate of unemployment and the number of unemployed have been rising in the last few months after many years of quite a gradual, steady decline. Now, so far, this had been mainly confined to the private-sector employment, so companies like construction firms have had to lay off workers. But the fact that this has now moved to the public sector is of great concern, particularly as there are obviously very few jobs these people can easily go to afterward, because it is not as if the private sector is actually taking on new workers, they are laying off workers, too.
Political Risk Management
RFE/RL: Is there much political risk for the government in taking steps that will add to the country's unemployment rolls?
Walker: It will certainly have a notable impact on the government's popularity ratings. Now whether that means that President [Nursultan] Nazarbaev will try to change the composition of his government to try to be seen to do something is another matter. It is not clear who he would be able to put in place to successfully prevent public opinion from turning too strongly against him personally. He must be feeling there is a great risk that his record of successful growth is being dinted very severely.
RFE/RL: Finally, Kazakhstan also is confronting its economic downturn with a bank-rescue package and a stimulus plan. What do the government job cuts tell us about the progress of those efforts to fight the crisis so far?
Walker: They still have pretty large reserves in the oil fund and the national bank has some fairly large foreign-currency reserves. They have already been drawing down on these to finance some of the stimulus packages.
Now it is certainly not clear that these have had any effect yet, but I don't think we would expect to see any immediate effect and it has only been a couple of months. But the fact that they are laying off people, not just working in government departments but also in key companies in the economy effectively owned by the Samruz-Kazyna Fund, suggests that the stimulus package in its current form is not having much impact.