April in Washington, DC is the time for beautiful cherry blossoms, sunny weather and the Spring meetings of two powerful global financial institutions.
The World Bank and International Monetary Fund (IMF) recently gathered together top representatives in Washington to set the direction for coming months. Given the power and influence of these two institutions, the decisions made at their meetings have the potential of significantly impacting the development of numerous countries. The World Bank and IMF can influence such key areas as economic growth, public debt, currency fluctuations and monetary and economic policies in a variety of regions.
As part of the Spring Meetings, on Thursday, April 18, The IMF unveiled its projections for the Central Asian region. The Fund highlighted four points on the economic outlook for the Middle East and Central Asia. It noted that “an uneven recovery is expected among the Middle East and North Africa and Caucasus and Central Asian economies amid high uncertainty.” It also pointed out that “inflation is receding in line with global trends.” While inflation may be receding, other challenges are not: “vulnerabilities remain high, in a context of higher-than-usual uncertainties and elevated set of downside risks.” The IMF also stated that policymakers “need to balance policy priorities in uncertain times.”
For the MENA region, the Fund is projecting growth “to remain subdued, improving moderately to 2.7 percent in 2024 (from 1.9 percent in 2023). In 2025, “growth is projected to strengthen to 4.2 percent ”. For the CCA region, the Fund believes that the “economies exhibit resilience” and “despite some moderation, growth is projected to remain robust at 3.9 percent in 2024 before picking up to 4.8 percent in 2025, owing in part to loosening macro policies, strong domestic demand, and idiosyncratic factors, such as oil production increases.”
Regarding inflation, in MENA the IMF sees that “inflation is approaching historical averages in many economies—with about one-third now close to or even below average—and monetary tightening cycles appear to have ended in most economies. The Fund highlighted that “after peaking in 2023, average inflation is forecast to ease to 15.4% in 2024 and 12.4% in 2025.” In the CCA, the Fund observed, “the majority of countries inflation is below or close to targets, providing room for some countries to begin or continue monetary easing. Inflation is forecast to ease from 7.7% in 2024 to 7.1% in 2025.”
Daryo had a unique opportunity to connect with Jihad Azour, Director of the Middle East and Central Asia Department of the IMF. Azour, who is also the former Finance Minister of Lebanon, kindly agreed to give us an exclusive interview sharing his insights on the IMF projections and his vision for Kazakhstan and other countries in the region.
Sitting down with Assel Nussupova the conversation began focusing on Azour’s views on the economic issues, challenges and opportunities facing Kazakhstan and the other Central Asian countries that were on the agenda at the IMF Spring meetings.
On economic issues, challenges, and opportunities
Azour stated that the IMF will “use these Spring meetings in order to accelerate discussions on the problems and shed light on some of the topics that are relevant for the region.” While Azour acknowledges that the Central Asian region has faced challenges in past few years, he noted the “steady” growth that has occurred, anticipating the trend will continue in 2024. That is not to imply, however, that no risks or problems may await. Azour pointed to a high “level of uncertainty” in the area, some of it tied to the conflict in Ukraine.
Azour emphasized that “the important dimension is the question of inflation.” He spoke of various monetary policies that were implemented by countries in Caucasus and Central Asia that allowed them to address the risk of inflation. Another “dimension”, according to Azour, “is the capacity for the region to address the number of structural issues.” From Azour’s remarks, it was clear that growth, risk, inflation and structural issues were likely to be explored during the meetings. Co-operation also seems to be a key theme – Azour noted, “During the Spring meetings we will also discuss how we can help to increase regional coordination and regional integration among countries in Caucasus and Central Asia. This will be a topic of our discussions with ministers and governments of the region.” To the question on any particular measures to improve the regional integration between the countries, Azour focused on one related to trade. He noted that over the past two years, a shift in trade has occurred through the Middle Corridor. Priorities regarding this include “the level of connectivity between the countries in terms of infrastructure and also in terms of new, soft infrastructure.” Azour also sees in this a “source of new potential investment, and those are the issues we will discuss with policymakers.”
When asked if the governments are ready to cooperate on the structural issues, Azour cited a current example of just such cooperation. He noted that the strong collaboration within regional governments has been strengthened recently with the establishment of a regional development center in Almaty that serves as a platform to increase capacity and strengthen peer-to-peer learning and regional coordination. He stated that “this platform has strengthened our capacity and also has provided an opportunity for the countries of Caucuses and Central Asia to increase their cooperation.”
On Kazakhstan’s goal of doubling the GDP
In our conversation with Azour, we also touched on the topic of Kazakhstan’s goal of doubling its GDP in the next five years. In his opinion, doubling the GDP or increasing the level of growth requires sustained levels of structural reforms. Azour believes structural reforms offer the most promising opportunity “to fast track the growth of the economy.” He noted, “This will have to increase productivity, attract investment, and create job opportunities.”
Diversification also comes into play: “New sectors beyond oil and gas sector, for example agriculture, will provide opportunities for Kazakhstan to accelerate growth and reduce the dependence on the volatility of the oil market.”
Azour shared a robust vision for growth, mentioning issues such as investing in climate, promotion of the private sector, job creation, strengthening the business environment, strengthening the rule of law, easing access to bring in investment and more. He also remarked that, “inclusive growth is very important”, touching on opportunities for women and the younger generation.
He commented, “The potential is there, the capacity to diversify is there, there is a certain number of interesting and fast-growing sectors that will help Kazakhstan to diversify its economy. And sequencing those reforms, accelerating their implementation would be an opportunity to accelerate growth.”
What are those “interesting and fast-growing sectors” in Azour’s opinion? He pointed to Kazakhstan’s “large potential in agriculture”, its “mineral resources” as well as its acceleration in “technology and financial services”.
In regards to agriculture, he noted that “with the growing importance of food security and climate change this could be an opportunity to diversify outside of fossil fuels.” Azour mentioned that “finishing the transition to the market economy is also important, further strengthening financial institutions and improving the business environment, investing in fast growing sectors like AI, digital banking.”
On the vision for the future of Kazakhstan and Central Asia for the next five years
When asked about his vision for the future of Kazakhstan and Central Asia for the next five years, Azour admitted that it is a very challenging question to answer. He was willing, however, to share his thoughts on the future of the region. He noted that “there are long term structural trends that are showing that over the last five to ten years we saw the slow-down of the development of growth compared to the average growth that the region used to have. Therefore, the priority needs to be to accelerate structural reform growth, in order to increase the convergence with emerging European countries. Because we still see a gap between the level of growth and the level of development that we see with the emerging European countries.”
Azour also discussed priorities including “preserving macroeconomic stability by keeping inflation under control”, and “energy producing countries accelerating their diversification away from fossil fuel sources of energy based on private-led economic growth.” He also pointed to change in global trade as an area for the Central Asian countries to consider, specifically in terms of the Middle Corridor.
On the role of the IMF after thirty (two) years of independence
When we inquired about the role of the IMF after more than three decades of independence, Azour provided a comprehensive overview. He remarked, “After thirty years of the emergence of the economies of Caucasus and Central Asia the Fund has been a very supportive partner in building new economic systems, moving from the centralized economy to more market-oriented economies and institutions with the establishment of currencies [and] central banks. Last year, we celebrated thirty-year anniversaries of the creation of several central banks in the region of Caucasus and Central Asia. For the last three decades we have been a partner of the countries in the region, reforming their economies, moving gradually to market economies”.
While the list of achievements is notable, Azour does not see the IMF’s role as completed, noting “There is still work to be done there, to fully transition to the market economy…Still requires the certain number of reforms. And this is one of the directions of our future collaboration in the region. How to create more interaction in those countries? How to create the common economic space in Central Asia and the economies of Caucasus? And this is also one of the Fund’s priorities, and for that we will continue our regular dialogue.”
He also engaged with the issue of “the size of the market.” Azour commented, “This will allow the land locked countries to further integrate on the global map. This is one of the priorities. How do we achieve this? By accelerating structural reforms, by completing the transition to the market economies and also by standardizing and normalizing rules and regulations that will allow…movement of capital and goods between the countries.”
He also touched on the subject of “convergence”, remarking “Another issue is the convergence. The convergence through accelerating integration and economic transformation and convergence where other emerging economies of similar nature such as emerging European countries and others. And investing in fast growing sectors would allow the region that has a good level of legislation, good level of labor to accelerate its economic transition. Those are the priorities that the Fund has.”
Azour also spoke of the IMF as a source of financing: “We provide financing to the certain number of countries, though certain programs such as to Armenia, Georgia, in the past to Kyrgyz Republic. We have recently agreed on the program with Tajikistan to support this country through technical assistance. We have strengthened our level of our collaboration in the region of Caucasus and Central Asia.”
Thoughts on Common Space
Regarding the common space between the countries of the Central Asian region, Azour underlined that the question is not to create something new, the question is how to accelerate integration. He noted that acceleration can come from different avenues. These include reducing barriers, creating new jobs and enlarging the size of the market. In Azour’s view, this will also allow foreign investors to come and operate at a larger scale. He noted, however, that this requires standardization. He also spoke of improving the quality of the common infrastructure of the countries in the region to allow for channeling goods and sharing resources. Azour believes that connectivity could increase the size of cooperation and also improve the economic output.
The IMF in Kazakhstan: An Unfolding Story
Slightly over thirty years ago, Kazakhstan and other countries of Central Asia began an unprecedented journey to adapt their economies to the global market. The transformation towards a new, market economy for Kazakhstan and other Central Asian countries could not be done without the IMF, an organization that has played a crucial role in macroeconomic stability and creating an independent economy based on market principles.
In light of this long and fruitful partnership, it is fascinating to explore the IMF’s projections, insights and plans today for Kazakhstan and its neighboring Central Asian countries. While the cherry blossoms in Washington may soon fade away, the policies and programs of the IMF in the region will not. Our thanks to Jihad Azour for sharing with us his thoughts and insights on the role of the IMF in Kazakhstan and Central Asia.
By Assel Nussupova
Comments (0)