Kazakhstan's monetary policy has been well managed. In 2004, inflation remained steady at 6.9%, up from 6.8% in 2003, though still higher than the predicted level of 5.3%-6.0%. In 2002 inflation was 6.6%, compared to 6.4% in 2001. Because of its strong macroeconomic performance and financial health, Kazakhstan became the first former Soviet republic to repay all of its debt to the International Monetary Fund (IMF) in 2000, 7 years ahead of schedule. In March 2002, the U.S. Department of Commerce graduated Kazakhstan to market economy status under U.S. trade law. The change in status recognized substantive market economy reforms in the areas of currency convertibility, wage rate determination, openness to foreign investment, and government control over the means of production and allocation of resources.

In September 2002, Kazakhstan became the first country in the former Soviet Union to receive an investment-grade credit rating from a major international credit rating agency. Estimated level of external debt in 2004 was $26.03 billion. In 2003, Kazakhstan's gross foreign debt was about $22.9 billion. Total governmental debt was $4.2 billion. This amounts to 14% of GDP. There has been a noticeable reduction in the ratio of debt to GDP observed in past years; the ratio of total governmental debt to GDP in 2000 was 21.7%, in 2001 it was 17.5%, and in 2002 it was 15.4%. In 2004, the figure fell to 13.7%.

The upturn in economic growth, combined with the results of earlier tax and financial sector reforms, dramatically improved government finances from the 1999 budget deficit level of 3.5% of GDP to a deficit of 1.2% of GDP in 2003. Government revenues grew from 19.8% of GDP in 1999 to 22.6% of GDP in 2001, but decreased to 16.2% of GDP in 2003. In 2000, Kazakhstan adopted a new tax code in an effort to consolidate these gains. On November 29, 2003 the Law on Changes to Tax Code was adopted, which reduced tax rates-- value added tax from 16% to 15%, social tax from 21% to 20%, and personal income tax from 30% to 20%. Kazakhstan furthered its reforms by adopting a new land code on June 20, 2003 and a customs code on April 5, 2003.

Oil and gas is the leading economic sector. Production of oil and gas condensate in Kazakhstan amounted to 59.3 million tons in 2004, which was 16% more than in 2003. Kazakhstan raised oil and gas condensate exports to 52.4 million tons in 2004, 18% higher compared to 2003. Gas production in Kazakhstan in 2004 amounted to 11.6 billion cubic meters, down 16% compared to 2003. Kazakhstan holds about 4 billion tons of proven recoverable oil reserves and 2 trillion cubic meters of gas. Industry analysts believe that planned expansion of oil production, coupled with the development of new fields, will enable the country to produce as much as 3 million barrels per day by 2015, lifting Kazakhstan into the ranks of the world's top 10 oil-producing nations. Kazakhstan's 2004 oil exports were valued at more than $11 billion, representing over 50% of overall exports. Major oil and gas fields and their recoverable oil reserves are Tengiz (7 billion barrels); Karachaganak (8 billion barrels and 1,350 billion cubic meters of natural gas); and Kashagan (7-9 billion barrels). Starting in 2004, the Government of Kazahkstan increased its take of oil deals by increasing taxation of new oil projects. Since then, no Western oil companies have initialed an oil deal.

Kazakhstan instituted an ambitious pension reform program in 1998. There are 16 saving pension funds in the republic. State Accumulating Pension Fund is the only state fund, which was planned to be privatized in 2004. The National Bank oversees and regulates the pension funds. The pension funds' growing demand for quality investment outlets triggered rapid development of the debt securities market. Pension fund capital is being invested almost exclusively in corporate and government bonds, including Government of Kazakhstan Eurobonds. The Kazakhstani banking system is developing rapidly. The banking system's capitalization now exceeds $1 billion. The National Bank has introduced deposit insurance in its campaign to strengthen the banking sector. Several major foreign banks have branches in Kazakhstan, including ABN-AMRO, Citibank, and HSBC.