National Bank likely to achieve results if inflation expectations are firmly anchored – IMF
In his opinion, «care must be taken to avoid broadening the NBK’s mandate or diluting its independence. Pursuing multiple objectives amid the challenges of keeping prices stable could hinder monetary policy effectiveness and accountability.»
«International experience suggests a more streamlined mandate for the NBK is desirable. Phasing out non-core activities, such as subsidized lending programs and other quasi-fiscal roles, would increase the effectiveness of monetary policy and the independence and credibility of the NBK,» the expert believes.
According to Nicolas Blancher, today’s economic environment – in Kazakhstan and the wider world – is characterized by multiple shocks: the COVID-19 pandemic, supply chain disruptions, the situation in Ukraine, and sanctions against Russia.
«Many public institutions have a role in implementing policies to lessen the immediate pain, especially for the most vulnerable, and support long-term growth and inclusion,» he says.
Governments can use fiscal policy to prop up domestic demand and growth, especially when high inflation limits the scope for monetary expansion.
«This is the case in Kazakhstan, where elevated oil revenues provide room for increased spending. Fiscal policy must, of course, strike a balance between supporting the economy, preserving fiscal sustainability, and maintaining macroeconomic stability, Nicolas Blancher adds.
«In the long term, structural reforms are critical to growth, and this is certainly true in Kazakhstan where the state has a predominant role in the economy. The business environment must be improved to continue the transition to a market-based economy and to private sector-led diversification and job creation.
In this context, there should be no change to the central bank’s primary contribution as the guarantor of price stability. The NBK is more likely to achieve this if it has a clear mandate, strong credibility, and inflation expectations are firmly anchored,» Nicolas Blancher concludes.