OREANDA-NEWS. On February 06, 2007 Fitch Ratings said in a special report released that the institutional frameworks of Kazakhstan subnationals have proved their viability since they were amended in 2005 and demonstrated gradual decentralization, reported the Official website http://en.government.kz.

"A centralised system of control and limited borrowing possibilities have increased the budget sustainability of Kazakhstan subnationals during periods of vulnerability," says Vladimir Redkin, Associate Director in Fitch's International Public Finance team. "However, greater decentralisation is needed to achieve stable long-term economic development, and recent legislation changes in regional borrowing procedures could be viewed as the first step in that direction."

Kazakhstan's budgetary framework is characterised by a strong bias towards centralised decision-making and fund distribution. Kazakhstani regions depend heavily on the central government, especially in terms of inter-regional equalisation transfers allocation. However, with the introduction of the 2005 budget code, the main parameters of the inter-governmental framework are now fixed for three years rather than just one year. The regions also had had limited borrowing possibilities since 2003, when subnationals in Kazakhstan were prohibited from issuing bonds or borrowing from banks; the only financing option was loans provided by the central government. However, following recent changes in the national regulation, the cities of Astana and Almaty can start tapping the capital market from 2008.

The report covers administrative and legal frameworks in the Republic of Kazakhstan, budget execution and control procedures, modern budgetary framework, including budget revenue sources and expenditure assignment, inter-governmental relations and debt issues.