Kazakhstan is entering 2026 with record-high interest rates. On the one hand, this supports the tenge, stabilizes the currency and debt markets, and helps anchor inflation expectations. On the other hand, it makes borrowing more expensive and forces banks to take a more cautious approach to risk. These conclusions are outlined in the latest interest rate review by the Analytical Center of the Association of Financiers of Kazakhstan (AFK), DKNews.kz reports.
Why real interest rates have returned to positive territory
For most of 2025, real interest rates in the economy were declining. Amid accelerating inflation, they fell from 6.65% at the beginning of the year to a local low of 3.6% at the start of the fourth quarter. This increased pressure on the tenge and fueled inflation expectations.
The turning point came in autumn. The October increase of the base rate to 18%, combined with inflation stabilization toward the end of the year, allowed real rates to rebound and settle at around 5.7%. As a result, tenge-denominated assets became attractive again, and exchange rate dynamics improved significantly.
An additional boost came from the central bank’s signal that tight monetary policy will be maintained at least through the first half of 2026, helping anchor inflation expectations and reduce speculative pressure on the currency market.
Money market adapts to a tight policy environment
Throughout 2025, money market conditions evolved in response to two base rate hikes, tax periods and a substantial tightening of minimum reserve requirements.
The current TONIA rate of about 17% already compensates for:
- actual inflation (12.3%), and
- market expectations regarding the USDKZT exchange rate over the next year (553.6 tenge per dollar, or +8.1%).
In other words, holding liquidity in tenge once again offers a positive real return.
Rates rise, but interest spreads narrow
Despite rising nominal rates on both loans and deposits, interest spreads in the banking system have narrowed. This is because deposit rates have increased faster than lending rates.
As a result:
- the spread between average weighted corporate loan and deposit rates narrowed from 3.8% at the beginning of 2025 to 3.1%,
- in the retail segment, the spread declined from 5.6% to 5.2%.
For banks, this means compressed margins. Lower profitability, in turn, leads to more conservative lending policies, stricter borrower requirements and slower credit growth.
What this means for the real economy
Shrinking interest spreads and higher funding costs strengthen the transmission of tight monetary policy to the real economy. Banks become more selective, while businesses and households delay new borrowing decisions.
This effect is amplified by:
- tighter reserve requirements,
- macroprudential measures, and
- changes in the tax framework.
Together, these factors increase the risk of slower domestic demand and weaker investment activity.
Debt market becomes a magnet for capital
Higher base rates pushed yields on the debt market higher, especially along the short and medium segments of the yield curve, where returns approached money market levels.
This significantly increased the attractiveness of government securities. As a result:
- non-resident investments in Kazakhstan’s government bonds rose by 82% in 2025,
- from 1.1 trillion tenge to 2.0 trillion tenge.
The inflow supported liquidity and demand in the bond market and allowed the Ministry of Finance to raise funding without triggering additional yield increases or excessive volatility.
2026: a year of persistently high borrowing costs
According to AFK, Kazakhstan enters 2026 in an environment of sustained high interest rates. While these rates help preserve macro-financial stability and support the tenge and debt markets, they also act as a brake on credit growth, investment and economic expansion.
A rate cut in the second half of the year is not guaranteed and will depend on:
- the durability of disinflation,
- fiscal policy parameters, and
- external conditions, including commodity price dynamics.
Inflation risks remain mixed. Structural pro-inflationary factors persist, such as rising regulated tariffs, fuel prices, business costs and elevated inflation expectations. At the same time, external risks linked to potentially lower commodity prices are increasing.
Kazakhstan enters 2026 with a strong monetary stance but expensive money. This supports financial stability, yet limits the pace of economic growth. The key challenge ahead is how the economy adapts to this environment without a sharp slowdown in investment and domestic demand.
