Impact of the Economic Crisis and Food and Fuel Price Volatility on Children and Women in Kazakhstan Report for UNICEF Kazakhstan Office Report by: Maja Gavrilovic, Caroline Harper, Nicola Jones, Rachel Marcus, Paola Pereznieto With support from Karlagash Binazarova and Irshat Mukhametov (National Analytical Centre under the Government and the National Bank of the Republic of Kazakhstan) October 2009 * Disclaimer: The views presented in this paper are those of the authors and do not necessarily represent the views of UNICEF Overseas Development Institute 111 Westminster Bridge Road London SE1 7JD UK Tel: +44 (0)20 7922 0300 Fax: +44 (0)20 7922 0399 www.odi.org.uk Impact of the Economic Crisis and Food and Fuel Price Volatility on Children and Women in Kazakhstan Acknowledgements This report has benefited from discussions with numerous people in Kazakhstan, who shared their insights and time generously. Particular thanks must go to focus group participants in Shymkent, Karaganda city and Baidibek, where the research was carried out. We are also grateful to the Deputy Mayor’s Office of Shymkent and Baidibek, the South Kazakhstan Women’s Business Association and Karaganda state Department on Child Rights of the Child Rights Committee, who organised informant selection. The authors would also like to thank the UNICEF Kazakhstan team, especially Ms. Hanna Singer and Faniya Mussayeva, for their helpful comments, background information and support. Lastly, sincere credit is owed to Artur Akhmet for his invaluable assistance during the implementation of the study. ii Impact of the Economic Crisis and Food and Fuel Price Volatility on Children and Women in Kazakhstan Contents Acknowledgements .................................................................................................................... ii List of figures, tables and boxes ............................................................................................... iv List of acronyms ......................................................................................................................... v Executive summary ................................................................................................................... vi 1. Introduction .......................................................................................................................... 1 1.1 Overview ......................................................................................................................... 1 1.2 Methodology ................................................................................................................... 2 1.3 Structure of the report ..................................................................................................... 2 2. Conceptual framework ........................................................................................................ 4 3. Key characteristics of the crisis in Kazakhstan ................................................................. 6 3.1 The economy between the 1998 Russian crisis and the present crisis ............................ 6 3.2 Characteristics of the current crisis ................................................................................. 7 4. Impacts of the crisis on vulnerability of children and families ....................................... 14 4.1 Profile of vulnerability in the current crisis ..................................................................... 14 4.2 Household-level impacts ............................................................................................... 23 4.3 Coping strategies .......................................................................................................... 25 4.4 Impacts on children’s rights ........................................................................................... 28 5. Reviewing public financial management.......................................................................... 35 5.1 Overview of public financial management in Kazakhstan .............................................. 35 5.2 Alignment between social sector policies and budgeting in the context of the crisis ...... 38 5.3 Social sector spending in the context of the crisis ......................................................... 39 6. Economic and social policy responses to the crisis ....................................................... 43 6.1 Fiscal stimulus package ............................................................................................... 43 6.2 Second stage of ACP: Labour policy ............................................................................. 44 6.3 Investment in social policy ............................................................................................ 46 7. Conclusions and policy recommendations ..................................................................... 58 7.1 Impacts of the financial crisis on Kazakhstan ................................................................ 58 7.2 Household-level impacts of crisis .................................................................................. 59 7.3 Recommendations ........................................................................................................ 60 References ................................................................................................................................ 64 Appendix 1: Question guide ..................................................................................................... 71 Appendix 2: Types of social protection measures ................................................................. 78 Appendix 3: Conceptual framework ........................................................................................ 82 iii Impact of the Economic Crisis and Food and Fuel Price Volatility on Children and Women in Kazakhstan List of figures, tables and boxes Figure 1: Linkages between macro-level shocks and children’s experiences of poverty and vulnerability ..................................................................................................................................... 4 Figure 2: Economic growth trend, 2005-2009 .................................................................................. 8 Figure 3: Inflation, overall and by components, Jan 2006-Oct 2008 (%) .......................................... 9 Figure 4: Inflation impact on real wages, Jan 2007-Jan 2009 .......................................................... 9 Figure 5: Investment activity, 2007 Q1-2009 Q1 ........................................................................... 10 Figure 6: Monthly labour market indicators, 2008-2009 Q3 ........................................................... 11 Figure 7: Kazakhstan’s overall public expenditure/GDP in relation to transition economies’ norm . 15 Figure 8: Average nominal wages by gender, 2005-2009 ............................................................. 17 Figure 9: Changes in depth and severity of poverty, 2005-2009 Q2 .............................................. 20 Figure 11: Structure of cash expenses of poor households in 2005 (%) ........................................ 21 Figure 12: Real growth of wages in sectors (date to date) ............................................................. 22 Figure 13: Discrepancy between initially planned (December 2008) and revised central budget (April 2009) ................................................................................................................................... 38 Figure 14: Public expenditure on social sectors, 1991-2007 (%) ................................................... 40 Table 1: Economic growth outlook for Kazakhstan, 2002-2008 ....................................................... 7 Table 2: Employment outlook for Kazakhstan ............................................................................... 11 Table 3: Functional responsibilities for health, education and social protection ............................. 36 Table 4: Budget outlook (KZT billions) .......................................................................................... 39 Table 5: Crisis mitigation measures, 2007-2010 ($ millions) ......................................................... 40 Table 6: State budget expenditures to social sectors .................................................................... 41 Table 7: Education, health and social protection expenditure, 2003-2009 (consolidated, central and local) as % of GDP ........................................................................................................................ 42 Table 8: Types of social benefits ...................................................... Error! Bookmark not defined. Box 1: Pre-existing policy infrastructure ........................................................................................ 46 Box 2: Social assistance programming challenges ........................... Error! Bookmark not defined. Box 3: The role of citizen voices in shaping policy responses ....................................................... 57 iv Impact of the Economic Crisis and Food and Fuel Price Volatility on Children and Women in Kazakhstan List of acronyms ACP Anti-crisis Plan ADB Asian Development Bank AIDS Acquired Immunodeficiency Syndrome ASRK Agency of Statistics of the Republic of Kazakhstan BBP Basic Benefit Package CEDAW Convention on Elimination of All Forms of Discrimination against Women CIE Centre for International Economics CIS