Local Government Borrowing

288 Meruert Makhmutova

In 2005,withdrawals deducted from the Atyrauskaya oblast budget amounted to 49 percent ofall budget expenditures,but,they were partly refunded in the form ofa special transfer to the oblast budget (9 percent of income).Withdrawals from the Almaty city budget amounted to 39 percent ofexpenditures.These amounts were partly refunded in the form ofa special transfer to the municipal budget (14.5 percent ofincome).

Since 2005,the Budget Code has provided a new legal framework.The code defines official transfers,which are subdivided into general transfers, target-oriented current transfers,and transfers targeted at development. Budget subventions and budget withdrawals are identified as general officialtransfers.They are established in absolute terms for a three-year period (thatis,they are subject to change every three years) with thefollowing breakdown:

Between the national budget and the budgets ofoblasts and the cities of

Almaty and Astana—by law Between the oblast budget and the budgets ofrayons (and towns ofoblast importance)—by oblast maslikhat decision.

Local Government Borrowing

Local budgets can run deficits.Local representative and executive bodies bear responsibility for balancing the appropriate local budgets.Budget deficits are covered from borrowing.At the request ofoblast akims and the akims ofAstana and Almaty,the Ministry ofFinance may provide budget loans to local budgets from the national budget to fund investment programs and to cover cash gaps.The same is true at the rayon level.Rayon executive bodies can borrow from the oblast budget to cover a budget deficit,a cash gap,or the implementation ofan investment program.

Until 2005,borrowing by local executive bodies was carried out as a form ofloan contract or as a capital issue by the local executive bodies.The procedures for concluding loan contracts and issuing government securities by local executive bodies were defined by the government.

In 1999,regions started issuing their own bonds.The issuers are not municipalities but oblast-level local executive authorities.In each case,resolutions were adopted by the government that determined procedures for issuing,floating,and redeeming bonds.Between 1999 and 2003,overall improvement in the macroeconomic situation and reduction ofthe refinancing rate by the National Bank permitted interest rates to gradually decrease and terms ofborrowing to increase.