Kazakhstan hits a new high in external debt accumulation.
In a significant development, Kazakhstan's external debt has surpassed a historic milestone, reaching $170.5 billion in the first quarter of 2025. This remarkable increase, marking the highest level since statistics were first recorded in 2001, can be attributed to a combination of geopolitical tensions, inflationary pressures, currency depreciation, tighter monetary policies, and continuing fiscal deficits within an unstable global and regional economic environment.
Since the beginning of the year, Kazakhstan's external debt has increased by $5.7 billion, a significant rise that has been influenced by several factors. Economic pressures related to regional geopolitical instability and spillover effects from the war in Ukraine have exacerbated vulnerabilities, worsening external financing conditions and increasing financing needs. Elevated inflation and currency depreciation, driven by global factors such as a strong US dollar, budget deficits, and the weakness of the Russian rouble, have led the National Bank of Kazakhstan to increase interest rates sharply to contain inflation, adding to borrowing costs and debt servicing pressures.
The global environment of supply chain disruptions and higher commodity prices has contributed to inflationary pressures and fiscal stresses, indirectly influencing external debt accumulation as the country seeks additional financing. Broader fiscal deficits amid regional instability and attempts to stabilize the financial system, including new regulatory measures on banks, further reflect the challenging macroeconomic context influencing borrowing needs.
The structure of Kazakhstan's external debt suggests a strong reliance on long-term loans and debt securities from non-residents. Loans and loans from non-residents make up 71.9% of Kazakhstan's external debt, with the largest external debt owed to the Netherlands. Debt securities held by non-residents constitute 9.3% of Kazakhstan's external debt, while the remaining 13% consists of other forms of debt.
It is important to note that while long-term external debt minimizes liquidity risks, it strengthens the influence of market conditions on debt repayment and servicing. The increase in external debt may impact Kazakhstan's ability to repay and service its debt in the future.
Kazakhstan's external debt is also significant to other countries, including Russia, the UK, the US, France, China, and the Bermuda Islands. The President of Kazakhstan, Tokayev, has recently sent a response letter to President Trump regarding the imposition of tariffs on Kazakh imports.
The external debt figures for the past two decades provide a clear picture of Kazakhstan's debt evolution. In 2001, the external debt stood at $12.6 billion, and it steadily increased over the years, reaching $32.7 billion in 2005, $74 billion in 2007, $150 billion in 2014, and peaking at $167.5 billion in 2018. The debt then decreased slightly to $160.3 billion in 2019 before rising again to $161.1 billion in 2023. The most recent figures, as of April 1, 2023, show a debt of $170.5 billion.
In conclusion, Kazakhstan's external debt increase is a reflection of the complex and challenging global and regional economic environment. As the country navigates these challenges, it continues to seek financial stability while maintaining its economic growth trajectory.
In light of the ongoing global and regional economic challenges, Kazakhstan's external debt increase has been influenced by factors such as geopolitical instability, inflation, currency depreciation, and fiscal deficits, all contributing to a robust borrowing need. The country's dependence on long-term loans and debt securities from non-residents, along with the impact of external financing conditions, underscores the significant role the finance industry and business world play in shaping Kazakhstan's economic landscape.
