Local Government Organization and Finance: Kazakhstan
289
From 1999 to 2002, banks and pension funds were the major holders of securities of local executive agencies. In 2002, the Ministry of Finance announced that the government would reduce the level of borrowing by local authorities. In 2003, in accordance with new regulations, pension funds were advised to limit investments in securities of local executive authorities to no more than 5 percent of their assets. This change influenced the decrease in the activities of local executive agencies related to capital issues. International rating agencies have awarded investment ratings to all oblasts except East Kazakhstan. The oblasts received ratings that varied between B+ and BBB–. East Kazakhstan was excluded because of the strong dependence of its local budget income on the KazZinc enterprise: a considerable amount of taxes and payments are received from (ensured by) this enterprise. On the whole, the government strictly controls the growth of local borrowing. The major obstacle to local borrowing is the absence of reliable medium-term and long-term budget planning at the local level, because of the uncertainty surrounding the government policy concerning the allocation of taxes between the national and local budgets and the rate of budget withdrawals. In general, local borrowing for capital investments will be expedient only if local agencies have actual instruments for managing local budget revenues. Article 202 of the Budget Code prohibits local borrowing from the capital market. Local executive bodies of the oblasts and the cities of Almaty and Astana can obtain loans from the government of Kazakhstan to finance budget deficits and to cover cash gaps. Rayons that need to borrow to finance a budget deficit, cover a cash gap, or implement an investment project can obtain loans from the oblast authorities. The Budget Code defines the fundamental rules of borrowing by local executive bodies and controls the volumes of borrowing as follows: The debt limit of a local executive body may not exceed 25 percent of local budget income for the appropriate financial year. The volume of expenses in connection with paying off the debt service of local executive bodies may not exceed 10 percent of local budget income for the appropriate year.
Local Government Administration The Law on Civil Service, which was enacted in 1999, provides for the categorization of civil servants into political and administrative employees.4
