Kazakhstan's inflation fell to 9.3% on a stronger tenge, not on softer demand

Kazakhstan's National Bank cut its base rate by 50 basis points to 16.25% on 4 September, its third consecutive cut, and on 1 October the Bureau of National Statistics reported that annual inflation had slowed to 9.3% in September from 9.8% in August. Both numbers read as disinflation. The composition reads differently: monthly inflation was unchanged at 0.6%, non-food inflation was still 11%, growth has not slowed, and the bank's own statement credits a stronger tenge and favourable oil prices with "a significant disinflationary effect". The next decision, due on 23 October, will test how much of the improvement the bank actually controls.

The rate path and the September print

The easing cycle has been deliberate. The bank cut from 18% to 17% on 5 June, to 16.75% on 24 July and to 16.25% on 4 September, 175 basis points across three meetings. In July it warned that "underlying components of price growth have accelerated, while inflation expectations remain relatively elevated".

The September data support that caution. On the statistics bureau's figures, annual inflation was 9.3%, with food at 8.5% (from 9.5%), non-food at 11% (from 11.4%) and paid services unchanged at 8.9%. Monthly inflation was 0.6% for a second month, with services up 1% and food down 0.1%. A 0.6% monthly pace sustained for a year leaves inflation near 7%, not at the 5% target. In August, the month the bank acted on, core inflation was 0.7%. Household expectations for the year ahead did improve, to 12.1% from 13.4%.

The forecast revisions are the clearest signal. The bank has held its 2026 inflation range at 9-11% since lowering it from 9.5-11.5% in June, but on 4 September it raised its 2027 range to 6.5-8.5% from 5.5-7.5%, citing higher external inflation, while still expecting inflation close to 5% in 2028. Raising the 2027 forecast and cutting the rate in the same statement is an admission that the return to target has been pushed out rather than brought forward.

A stronger tenge is doing part of the work

Governor Timur Suleimenov's statement is explicit that "the stronger tenge, supported both by the monetary policy stance" and "favorable oil prices, is exerting a significant disinflationary effect". The currency has kept appreciating since. It stood at 461.57 to the dollar at the end of August, after a 2.6% monthly gain that Halyk Finance attributed to foreign-currency supply exceeding demand and to non-resident capital buying tenge assets, helped by S&P Global's upgrade of Kazakhstan to BBB with a stable outlook that month; the National Bank's official rate set for 3 October was 447.73. The bank bought $721mn for the state pension fund in August and ran no interventions.

That channel is reversible, which is why the bank is tightening elsewhere while cutting. The third and final stage of its higher minimum reserve requirements took effect in September, lifting required reserves to KZT 4.3 trillion and total absorption of excess liquidity to about KZT 7 trillion. The IMF, after a June staff visit, called measures to reduce excess liquidity, including higher reserve requirements and more issuance of National Bank notes, "essential to ease inflation pressures over time". The policy rate is coming down; the quantity of money is being squeezed.

Growth is steady, and so is the demand risk

Growth has been flat rather than cooling: 4.1% year on year in the first half, 4.1% in January-July and 4.1% in January-August. Non-oil output grew 5.4% in the seven months to July, and over eight months manufacturing was up 8.4% and construction 15.6%. The Eurasian Development Bank's September outlook put fixed capital investment at KZT 11.5 trillion ($25.3bn) and gross international reserves at $63.3bn as of 1 August. The IMF in June projected 2026 growth of about 4.6% and inflation around 10% for the year.

The bank treats this as a risk, not a cushion. Its September risk list runs to global food and energy prices, a possible demand-supply imbalance from investment growth, inflation expectations that remain unanchored, fiscal discipline, and the pass-through from housing, utility and fuel price reform.

The 2027 budget plans less consolidation than the IMF assumed

The government approved the draft 2027-2029 budget on 25 August. For 2027 it sets spending at KZT 30.2 trillion and revenues at KZT 25.6 trillion, 12.9% of GDP, against nominal GDP of KZT 199.3 trillion, with a headline deficit of 2.3% of GDP. The National Fund supplies KZT 4.4 trillion of that, about $9.6bn: a guaranteed transfer of KZT 2.4 trillion ($5.1bn) and a targeted transfer of KZT 2 trillion ($4.2bn) reserved for critical infrastructure. The fund's net foreign-currency assets are projected to rise from $65.2bn in 2027 to $70.6bn in 2029. On 17 September the economy ministry raised the budget's oil-price assumption to $70 a barrel from $60.

The non-oil deficit is the number that matters. The government's own path takes it from 5.3% of GDP in 2027 to 2.5% in 2029. The IMF in June projected 4.9% in 2026, 3.7% in 2027 and 2.7% in 2028. The 2027 plan is looser than the Fund's projection, and the record argues for scepticism about the later years: Kursiv calculated that in 2025 National Fund withdrawals of KZT 5.25 trillion exceeded oil-sector tax inflows of KZT 3.73 trillion by about half again, and that the non-oil deficit came in at 6.9% of GDP against the 6% target in the public finance concept.

Tax reform is the offset. The new Tax Code raised the base VAT rate from 12% to 16% on 1 January 2026 and cut the mandatory registration threshold to KZT 40mn, and the economy ministry attributes KZT 1.1 trillion of the KZT 2.8 trillion rise in 2027 revenues to lower VAT refunds. The cost showed up early: Kursiv reported the manufacturing PMI falling to 49.8 in January from 51 in December, with 44% of surveyed firms reporting higher input costs. The two official price forecasts for 2027 still differ by a full point, the economy ministry at 7.5-9.5% and the National Bank at 6.5-8.5%.

What to watch

• The 23 October decision: a further cut would confirm the bank's pace, a pause would mean the demand and fiscal risks have outweighed a 9.3% print.
• Monthly inflation: the annual rate is falling partly on base effects, so the 0.6% monthly pace is the better test.
• The tenge from 447.73: the bank has tied disinflation to its strength, so sustained depreciation changes the 2027 forecast.
• The budget's passage through parliament, and whether the KZT 4.4 trillion National Fund withdrawal and the 5.3% non-oil deficit survive it.

Sources

• National Bank of Kazakhstan — Statement by the Governor T.M. Suleimenov on the Base Rate, 4 September 2026
• National Bank of Kazakhstan — Statement by the Governor T.M. Suleimenov on the Base Rate, 24 July 2026
• National Bank of Kazakhstan — Daily official (market) foreign exchange rates
• National Bank of Kazakhstan — Base rate and next decision date
• Bureau of National Statistics — Inflation in the Republic of Kazakhstan (September 2026)
• BIS — Timur Suleimenov: Statement on the base rate of the National Bank of Kazakhstan
• IMF — IMF staff concludes visit to Kazakhstan
• Trend.Az — Kazakhstan outlines key priorities for republican budget through 2029
• Trend.Az — Kazakhstan's GDP growth holds at 4.1% in 8M2026
• Qazinform — Kazakhstan's budget revenues expected to rise by 2.8 trillion tenge in 2027
• Qazinform — Oil price assumption revised in Kazakhstan's draft 2027-2029 budget
• Qazinform — Government approves 2027-2029 draft national budget
• Qazinform — Kazakhstan lowers 2026 inflation outlook
• The Times of Central Asia — Kazakhstan forecasts GDP growth above 5% in 2027-2029
• Kursiv — Increase in VAT puts pressure on business activity in Kazakhstan
• Kursiv — Kazakhstan's oil fund withdrawals outpace gains
• The Astana Times — Kazakh President signs new Tax Code
• The Astana Times — Expert: higher foreign currency supply supports tenge strengthening
• The Astana Times — EDB: Kazakhstan maintains growth, strengthens position amid tighter global financing conditions