Kazakhstan Reacts to Low Oil Prices by Trimming Government Spending Plans

Energy-rich Kazakhstan will trim government spending plans for the next three years because of falling oil prices, the prime minister said Monday.

A new budget will be drawn up based on projected average world oil prices of $40 per barrel in 2009 and $50 per barrel for the Brent benchmark in 2010 and 2011, Karim Masimov told a government meeting in the Central Asian nation.

"We must forget about the period when oil prices were high, we have entered another cycle," Masimov said.

Kazakhstan's economy, underwritten by foreign lending, has been buffeted over the past year as global credit markets froze. The fall in oil prices has further threatened financial stability in the oil-dependent country, forcing authorities to promise multibillion dollar injections into the economy.

Masimov said the cut in expenditures will not affect social welfare programs.

Kazakhstan was previously basing its budget for the next three years on an average oil price of $60 per barrel.

The new three-year budget plan will require parliamentary approval, but is unlikely to meet any resistance in the one-party legislature.

Author: Jo Amey