EXTERNAL DEDT OF KAZAKHSTAN AND WAYS TO RESOLVE IT

ABSTRACT

Are foreign loans beneficial for every country? This topic can be considered problematic. Because external debt can pose a serious threat to the country's economy. In this article, we look at total external debt and compare several countries. In our country, issues of external debt are also being considered.

Keywords: external loans, sovereign default, benefits and risks of external debt.

External loans are loans from the country's creditors, including from chamber banks, government and international financial institutions. These loans, in addition to interest, usually have to be paid in the currency in which they received the loan. To find the required currency, the borrower can sell the goods and export the goods to the lender. If the government is unable to pay or refuses to pay the debt, it can default.

Sovereign default is the payment of government debt. Countries have been involved in repaying loans to increase, borrow and raise prices in the future. However, sovereign countries do not obey the laws of ordinary bankruptcy, and they can get rid of debt without legal consequences [1]. Relevance of this topic - do external debts create problems for the country's economy?

How important is external debt for the state? External loans are used to meet humanitarian or emergency needs. For example, if people in a country are starving and cannot afford food, they can get food on credit. Yes, we can say that external debt contributes to the country's economic development. We can have any resources, products, goods. For example, Japan is one of the developed countries, but there are not enough resources. If the state does not have enough funds, it can borrow from the state rich in resources, and at the expense of the resource they contribute to the development of their country.

If the amount of debt is large, it can hinder the development of the country. Of course, the debt will be heavy for the country, and if people do not pay off their debts, such as personal debt, it will be difficult to resolve it in the future.

Figure 1. Total external debt of the countries of the world in 2019 [2]

As shown in Figure 1, the United States has the highest total external debt in the world. The country updates the record for the number of loans every year. According to Nikolai Kulbaki, the main problem of debt is not its quantity, but how to solve it. According to him, the US gross domestic product is lower than in some countries, but it can solve debt better.

What are the consequences of debt for the state?

At any given time, states default to different circumstances. For example, if the government borrows in a different currency, the price of the currency could change, putting the government in a difficult position [3].

One of the negative consequences of external debt for the state is the slow pace of economic development. In some countries, especially in developing countries, there is pressure on debt and budget deficits.

Figure 2. External debt of Kazakhstan for 2010-2020 [4].

Figure 3. Kazakhstan owes money to 145 countries. Including source countries: Netherlands, UK and China [4].

Debts include loans from inter-company, central banks and other banks. Among them is the large-scale mining industry.

Figure 3. Gross Domestic Product of Kazakhstan for 2016-2019 [5]

As shown in Figure 3, Kazakhstan's GDP has declined by several percent since 2016. At the beginning of 2019, oil production, industrial production growth, construction and services were active, but the number of consumers decreased, despite the increase in wages. The number of exports decreased while the amount of imports increased [6].

Kazakhstan's undifferentiated, uncompetitive economy is critically dependent on oil exports. The deterioration of the balance of payments causes the devaluation of the tenge not only due to the decline in oil prices as a source of foreign exchange earnings, but also due to the large volume of payments on the growing external debt of the republic [7]. US government politicians have suggested ways to settle the debt:

1) Reduced costs;

2) Increased income [8].

What can we offer our state? We believe that first of all it is necessary to solve the problem of the gross domestic product. We have many resources that we can process and produce. If we export our products, we will not only increase the country's income, but also strengthen our ties with other countries. Our goal is to become one of the developed countries. We think that if the country has big incomes, we will be able to repay the debt on time. It should not be forgotten that US policymakers must also take into account the proposed paths. In June 2019, Kassym-Jomart Tokayev noted the goals of economic reforms and development aimed at the development of modern and innovative trade and non-resource sector [9].

In short, debt is both good and bad. Debt is under threat of economic crisis. We cannot pass it, we have to watch it every day. Because we cannot predict when debt will skyrocket. You have to be ready for anything. We are convinced that if the main problems of our country are resolved now, then in the future there will be an opportunity to improve economic development and join the ranks of developed countries. This provides many opportunities for young people. If we take advantage of these opportunities, everyone will be able to contribute to the development of our country.

References:

1. Author: Will Kenton “External Debt Defined” https://www.investopedia.com/terms/e/external-debt.asp
2. Author: Luca Ventura “Countries With The Most External Debt 2019” https://www.gfmag.com/global-data/economic-data/xtegh9-external-debt-in-countries-around-the-world
3. https://thequestion.ru/questions/116979/esli_v_ssha_vse_tak_khorosho_to_pochemu_u_c25a6dff
4. https://nationalbank.kz/ru/search?query=%D0%B2%D0%BD%D0%B5%D1%88%D0%BD%D0%B8%D0%B9+%D0%B4%D0%BE%D0%BB%D0%B3
5. https://www.ceicdata.com/en/indicator/kazakhstan/external-debt
6. https://www.focus-economics.com/countries/kazakhstan
7. https://astanatimes.com/2019/10/kazakhstans-payment-balance-develops-1-9-billion-deficit-external-debt-shrinks-by-467-6-million-in-first-half-of-2019/
8. Authors: James McBride, Andrew Chatzky and Anshu Siripurapu “The National Debt Dilemma” https://www.cfr.org/backgrounder/national-debt-dilemma
9.  https://www.worldbank.org/en/country/kazakhstan/overview