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Increasing the efficiency of national fund’s usage

 Nowadays at the period of high prices on oil, petroleum product, gas, nickel and aluminum, was

created the necessary prerequisites for the generating of Kazakhstan’s stabilization fund. The

main aim of creating such fund in Kazakhstan is- accumulation of income, which forms in the

export sector of the economy at the high price periods for the Russian export products, and theusage for repayment external debt.

First of all, it’s necessary to explore the world experience of generating various stabilization

funds, have a good look into principles and mechanisms of assets accumulation, fund’s

expenditures order, managing its assets.

Secondly, must be considered the most efficient usage of accumulated assets.

Similar stabilization funds and funds for future generations exist in countries, where the main

part of budget gain formed from the natural resource’s export earnings.

• Norway state petroleum Fund- founded in 1990s.

Necessity of creating such fund was, because of aging population and decrease in oil

production. And that’s why fund is simultaneously considered to be saving and stabilizing,and should provide stability in budgetary sphere in long- run. Government can request for 

permission from the parliament to use this fund in short or in long run to equalize budget

income level. The Ministry of Finance defines the basic directions of fund's means of 

investment, and also structure of a base portfolio. All actives of the state oil fund are

enclosed in foreign investment tools, one part of which is bonds with the fixed income, other 

part shares of the foreign companies. The fund invests the assets only in the share of the

companies which have been not occupied in oil sector whenever possible to smooth influence

of jumps of the world prices on oil.

• In state Alaska operates, actually, two funds: savings fund- Alaska Permanent Fund,

and stabilization fund- Constitutional budgetary reserve fund.

Permanent fund was established in 1976s, as trust fund for the future generations. Its basicpurpose is creation of investment base which could provide incomes for the future

generations when stocks of oil will be exhausted.

Constitutional budgetary reserve fund was established in 1990s, as the response for the sharp

decrease in price for oil in the end of 1980s, and it has led to reduction of the State

expenditure; also fall down in economic activity.

• Kuwait Oil Fund was established in 1960s, in the form of fund of the common reserves,

with the purpose of accumulation of assets from proficiency of the budget, which are

formed from the revenue of oil extraction. However rules of use of assets of fund have

not been precisely determined and it was used for financing all kinds of the State

expenditure. In 1976 there was created Reserve Fund for Future Generations, with the

purpose to maintenance of a stream of incomes to the future generations. From time of 

creation of reserve fund for the future generations, the fund of the common reserves

began to carry out stabilization functions, and also to be used for service of a public debt.

In foreign practices there’re exist two types of funds - stabilization and savings. Besides creation

of decentralized funds which assets, besides the central government, are used by regional

authorities, or the state companies.

Let's consider now some questions connected to functioning of stabilization fund in Kazakhstan -

National fund of Republic Kazakhstan (NFRK). The purpose of creation of this fund is

stabilization of incomes of the state budget. Also NFRK carries out savings function.

The national fund is called to provide macroeconomic stability by a removing of surplus of petrodollars from economy and restraint of pressure upon a rate of tenge inflation.

Now the national fund of Kazakhstan replenishes mainly due to petrodollars.

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Certainly, creation of National fund has both positive and negative consequences for economy of 

Kazakhstan. With occurrence NFRK the share of incomes of oil sector has decreased. In 2001

the parameter made more than 25 %, and in 2003 its share has decreased to 17.8 %.

Concerning investment of assets of National fund, actives of fund are placed abroad, thus, the

Kazakhstan money are invested in the foreign companies, while Kazakhstan itself desperately

needs investments. On the other hand, creation of fund increased an investment rating that has

facilitated loans in the world financial market.

Conclusion

• It is necessary to change strategy of using of assets of National fund which will bring

not only economic, but also social character of change.

• To the national fund should be given investment functions and to put assets in

development of national economy. Such investments will give double effect:

profitableness from investments and development of economy. The assets earned in

raw sector, should be spent for development of hi-tech manufactures and a

professional training for them.

Now it is necessary for Kazakhstan to become the state with powerful productive forces both in

raw, and in processing sectors.

Prepared by Nasibulina Meiramgul

Economics 3