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, from 14.9% of GDP in 2009.

The government's state budget for 2011 targets revenue of Manat12.06bn and expenditure of Manat12.75bn, resulting in a deficit of Manat687m, equivalent to 1.7% of the government's GDP forecast. According to the government's forecast, the rise in revenue is explained by a planned increase in transfers from SOFAZ. Over one-half of state budget revenue will come from SOFAZ in 2011, indicating the government's reliance on the fund for its expenditure plans. In April the government indicated that it may revise its state budget target in May owing to higher oil prices in the first quarter of 2011. The government may be tempted to increase social spending in a bid to reduce the risk posed by recent anti-government protests.

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 2011, contracting to 8.2% of GDP in 2015.