A 2000 Financial Sector Assessment Program (FSAP) report for Kazakhstan by the International Monetary Fund (IMF) observed that Kazakhstan was relatively transparent in its conduct of monetary policy. In 2004, the IMF issued a FSAP update that found the National Bank of Kazakhstan (NBK) to have maintained a high degree of transparency in the area of monetary policy because it improved its communication strategy, thereby achieving greater openness regarding its policy targets through a greater outreach to the public and an improved website. Nonetheless, the report found that improvements were needed in the areas of governance, accounting, and internal audit. Kazakhstan successfully subscribed to the IMF's Special Data Dissemination Standard (SDDS) in March of 2003, and the SDDS website discloses that Kazakhstan meets metadata requirements in terms of timeliness, periodicity, and coverage for its monetary data. It also shows that advance release calendars are available for monetary data releases, and that the data is subject to simultaneous release to all interested parties. The 2008 IMF Report on the Observance of Standards and Codes data module for Kazakhstan discloses that the NBK's monetary data generally follows the standards and guidelines of the IMF's Monetary and Financial Statistics Manual.

General Overview

In 2004, the International Monetary Fund (IMF) published a Financial Sector Assessment Program (FSAP) update for Kazakhstan that included coverage of monetary policy transparency issues. The report drew on findings of an earlier, 2000 FSAP that had found the National Bank of Kazakhstan (NBK) to be "relatively transparent in its conduct of monetary policy" (p. 67), but in need of improvement. In summarizing the results of that earlier report, the 2004 FSSA specifically singled out the areas of governance and internal audit as requiring attention. According to the report, the law governing the NBK needed to be strengthened by more clearly stipulating the causes for which members of the NBK's governing board could be dismissed. The report further noted that, at the time of the 2000 FSAP, greater public disclosure of information regarding the "structure and functions of the central bank's policy making body" (p. 67) would be warranted, and added that more detail was required in the NBK's financial statements regarding the qualifications of the auditors and the auditing policies they followed. In fact, the report noted that there was no public disclosure of any documents on internal auditing practices. However, the 2004 FSAP update went on to add that the NBK had achieved high transparency standards in the intervening years.

According to the 2004 FSAP, in 2002, the NBK unveiled plans to switch over to an inflation-targeting framework in the near future. In 2003, Kazakhstan had become a subscriber to the IMF's Special Data Dissemination Standard (SDDS). The SDDS website discloses that the NBK's monetary data meets SDDS requirements, that advance release calendars are available for the appropriate data sets, and that monetary data is subject to simultaneous release to all interested parties. The 2004 FSAP noted that the NBK had improved its website and had begun issuing public statements regarding its policy targets, using the mass media to facilitate public outreach. By the time of the 2004 report's publication, the NBK had also expanded the type of information it released to the public. For instance, it now disclosed refinancing terms and other facilities of the NBK in its "Bulletin," released a schedule of policy-board meetings, and "adopted and published regulations describing rules and procedures for the central bank's relationships and transactions with counterparties in its monetary operations and in the markets where it operates" (p. 67). The 2004 IMF report also applauded a 2003 Presidential Decree on the Central Bank Statute and Structure that explicitly banned the NBK from making direct loans to the government. Nonetheless, the 2004 report still found that the NBK needed to focus on governance, accounting, and internal auditing issues.

According to the IMF's 2008 Report on the Observance of Standards and Codes (ROSC), data module, the NBK uses an analytical framework for its monetary statistics that comports in large measure with the Monetary and Financial Statistics Manual (MFSM) of the IMF. The NBK's scope of coverage is also largely MFSM compliant. The report did note that the NBK does not include credit partnerships in its monetary statistics, but adds that "credit partnerships are presently a very small part of the banking system" (p. 16). According to the 2008 ROSC, the NBK uses the MFSM's classificatory system for its instruments and sectorization, with few exceptions. Chief among these exceptions is the NBK's failure to identify its deposit liabilities to the National Fund of Kazakhstan as a part of the central government sector. The NBK follows the MFSM guidelines for its basis for recording, as well, except that it does not value securities held for investment purposes at market prices. The 2008 IMF report asserted that "the source data from the NBK and banks' chart of accounts provide sufficiently detailed information for compiling monetary statistics" (p. 16). Cross-checking of data is automated and has become a routine practice, and a procedure for revision studies is in place (although the IMF noted that revision studies are not yet made public). The report added that the NBK employs sound statistical techniques, involving the use of electronic reporting. According to the IMF, the NBKs practices in this regard make possible both accuracy and timeliness in its generation of monetary statistics. Data inconsistencies are discoverable through the NBK's system of computerized balance-sheet cross-checking. There remain some problems with inconsistencies between monetary and government finance statistics data, according to the 2008 assessment. The tabular presentation of monetary statistics is clear, according to the 2008 IMF ROSC, and it is accompanied by definitions of terminology and notes on methodology in the Statistical Bulletin of the NBK (Russian and Kazakh versions). An advance release calendar for monetary statistics is publicly available, and the NBK website makes user feedback possible. In addition, the NBK provides the public with contact information on the SDDS website as well as in its Statistical Bulletin, to facilitate user assistance.

The IMF's 2007 Article IV Consultation report noted that Kazakhstan's monetary policy was complicated by the problem of large foreign exchange inflows. In response, the NBK adjusted its reserve requirements and increased its issuance of NBK notes, followed by a lengthening of their maturities. Lending rates have begun to move downward. The NBK intervened in response to the 2006 substantial appreciation of the tenge (Kazakhstan's official currency unit), leading to depreciation in the exchange rate in the second half of 2006. However, the 2007 IMF report notes that "the tenge resumed its upward trend in 2007, appreciating by about 6% against the dollar during January-April" (p. 8). According to the 2007 IMF report, Kazakhstan's monetary policy has been tightened and the NBK was prepared to take this further if inflationary pressures made it necessary. NBK officials anticipated a stronger tenge, going forward, and felt that this would help reduce inflationary pressure. However, authorities raised concerns "about speculative inflows related to perceptions of a "one-way bet" and agreed that flexibility of the tenge in both directions would help limit such flows" (p. 9).

The Principles

Clarity of roles, responsibilities and objectives of central banks.

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The NBK is Kazakhstan's central bank, according to its official website. It is mandated by law to represent Kazakhstan's interests when dealing with other central banks, international banks, credit and finance organizations, and the broader international community with regard to banking and monetary issues. It is accountable to the Kazakhstan president, but maintains operational independence. Nonetheless, according to the website, it coordinates its activity with the Kazakhstan government and pursues its policies within the context of the government's broader economic policies, insofar as these do not conflict with its primary legislative mandate. It is governed primarily by the Law on the National Bank of Kazakhstan, which establishes as its primary goal the maintenance of price stability. Among its legally mandated tasks are the development of monetary policy and its implementation, the support of the payment system, and the implementation of regulations and controls over foreign exchange, as well as maintaining the stability of the financial system.

Citing the findings of the FSAP of 2000, the IMF's 2004 FSAP reported that the Law on the National Bank remained deficient in that it failed to "list general criteria for the removal of the heads and members of the governing body" (p. 67) and did not release to the public any information on the way in which its policy-making body was structured nor on that body's functions. However, the 2004 FSAP did note that, since 2000, the NBK had achieved greater openness, using the media to disseminate information regarding its monetary policy targets and announcing its intent to adopt an inflation-targeting framework in the relatively near future. The NBK also began advance publication of a schedule of meetings of the bank's Supervisory Board (the principal policy-making body). Additionally, according to the 2004 FSAP, "the NBK has adopted and published regulations describing rules and procedures for the central bank's relationships and transactions with counterparties in its monetary operations and in the markets where it operates" (p. 67). However, the assessment does not specifically address Kazakhstan's compliance with this principle.

Open process for formulating and reporting monetary policy decisions.

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After noting that the 2000 FSAP had rated the NBK as only "relatively transparent in its conduct of monetary policy" (p. 67), the IMF concluded in 2004 that the central bank now had achieved "high" transparency standards. The 2004 FSSA also noted that the NBK had made improvements to its website and had begun making its monetary policy targets public through the media. However, the assessment does not specifically address Kazakhstan's compliance with this principle. The NBK website discloses the wide range of publications made available by the central bank. These include the Bulletin of the National Bank, the Statistical Bulletin, a publication on the Balance of Payments, an Economic Survey, and the NBK's Annual Report. It publishes a quarterly Inflation Survey as well, and the site also provides public access to the text of public announcements, press releases, and other materials relevant to monetary policy and the banks other core activities.

Public availability of information on monetary policy.

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After noting that the 2000 FSAP had rated the NBK as only "relatively transparent in its conduct of monetary policy" (p. 67), the IMF concluded in 2004 that the central bank now had achieved "high" transparency standards. According to the IMF's SDDS website, Kazakhstan became a subscriber to the SDDS in 2003, at which time it successfully met SDDS specifications for all required datasets. The SDDS and NBK websites also disclose that monetary data is subject to simultaneous release to all interested parties, and advance release calendars are available online. The 2004 FSSA noted that the NBK had made improvements to its website and had begun making its monetary policy targets public through the media. The NBK website makes a wide range of publications available, including the Bulletin of the National Bank, the Statistical Bulletin, a publication on the Balance of Payments, an Economic Survey, and the NBK's Annual Report. It publishes a quarterly Inflation Survey, and the site provides public access to the text of public announcements, press releases and other materials relevant to monetary policy and the banks other core activities. However, the assessment does not specifically address Kazakhstan's compliance with this principle.

Accountability and assurances of integrity by the central bank.

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According to the IMF's SDDS website, the Law on the National Bank and the Law on Banks and Banking Activity govern the NBK's activities relating to the compilation and dissemination of monetary statistics. The former law also establishes the requirement that the NBK publish its own balance sheets and the composite balance sheet of Kazakhstan's broader banking community. The IMF's 2003 ROSC data module noted that a number of Kazakhstan's laws address professionalism in the area of statistical activity as conducted by the NBK. The Law on State Statistics governs confidentiality. Ethical standards are set forth in the Law on Civil Service and the Civil Service Ethics Rules. Civil service employees must submit to an accreditation process once every three years, during which their professional knowledge is assessed and issues of potential conflict of interest are explored. These laws and regulations prohibit civil service employees from using professionally acquired "insider" information for personal gain and bans outside employment that might give rise to a conflict with their responsibilities within the civil service. Penalties for noncompliance are set forth in Kazakhstan's Anti-Corruption Law. The 2004 IMF FSSA adds that, even though the Law on the National Bank had been amended several times between 2000 and 2003, there was still a need for legislation to directly address governance, accounting, and internal auditing issues. In the words of the 2004 FSSA, "the laws still do not spell out the general criteria for removal of the heads and members of the governing body of the central bank. Accounting policies and internal governance procedures are not publicly available and are not included in released financial statements" (p. 67). The 2004 report added that the NBK does offer some internal audit information in its annual report, but stated that the information provided is limited. However, neither assessment specifically addresses Kazakhstan's compliance with this principle.

According to the IMF's 2008 Report on the Observance of Standards and Codes (ROSC), the NBK uses an analytical framework for its monetary statistics that comports in large measure with the Monetary and Financial Statistics Manual (MFSM) of the IMF. The NBK's scope of coverage is also largely MFSM compliant. The report did note that the NBK does not include credit partnerships in its monetary statistics, but adds that "credit partnerships are presently a very small part of the banking system" (p. 16). According to the 2008 ROSC, the NBK uses the MFSM's classificatory system for its instruments and sectorization, with few exceptions. Chief among these exceptions is the NBK's failure to identify its deposit liabilities to the National Fund of Kazakhstan as a part of the central government sector. The NBK follows the MFSM guidelines for its basis for recording, as well, except that it does not value securities held for investment purposes at market prices. The 2008 IMF report asserts that "the source data from the NBK and banks' chart of accounts provide sufficiently detailed information for compiling monetary statistics" (p. 16). Cross-checking of data is automated and has become a routine practice, and a procedure for revision studies is in place (although the IMF notes that revision studies are not yet made public). The report adds that the NBK employs sound statistical techniques, involving the use of electronic reporting. According to the IMF, the NBKs practices in this regard make possible both accuracy and timeliness in its generation of monetary statistics. Data inconsistencies are discoverable through the NBK's system of computerized balance-sheet cross-checking. There remain some problems with inconsistencies between monetary and government finance statistics data, according to the 2008 assessment. The tabular presentation of monetary statistics is clear, according to the 2008 IMF ROSC, and it is accompanied by definitions of terminology and notes on methodology in the Statistical Bulletin of the NBK (Russian and Kazakh versions). An advance release calendar for monetary statistics is publicly available, and the NBK website makes user feedback possible. In addition, the NBK provides the public with contact information on the SDDS website as well as in its Statistical Bulletin, to facilitate user assistance.