State budget revenue rose to Manat11.4bn (US$14.3bn) in 2010 (including transfers from SOFAZ) and expenditure increased to almost Manat11.8bn, resulting in a deficit of Manat363.5m (US$454m), equivalent to 0.9% of GDP. The data in our annual tables refer to the state budget excluding transfers from SOFAZ; on this basis, the 2010 deficit widened to 15.1% of GDP.

The government amended its 2011 budget projection in May 2011. The authorities now target revenue of Mant15.55bn (revised up from Manat12.06bn) and expenditure of Mant15.94bn (up from Manat12.75bn), resulting in a deficit equivalent to 0.9% of the government's GDP forecast. The rise in revenue is primarily due to an increase in transfers from SOFAZ, which it expects to reach Manat9.2bn (up from its earlier forecast of Manat6.5bn). Almost 60% of state budget revenue will come from SOFAZ in 2011, indicating the government's reliance on the fund for its expenditure plans. As was expected, the government has increased spending on social benefits and public-sector wages in a bid to mitigate the risk posed by recent anti-government protests. The sharp increase in transfers from SOFAZ to the budget has led us to change our budget deficit forecast for 2011, and we now expect it to widen to 21.5% of GDP (excluding transfers from SOFAZ).

As the outlook for the economy begins to improve from 2012 onwards, we expect that the government's reliance on the fund as a source of revenue will begin to wane. We forecast that the budget deficit (excluding transfers from SOFAZ) will begin to narrow from 2012, contracting to 10.4% of GDP in 2015.