It is thus conceivable that the budget is in deficit and financed through costly borrowing, while at the same time the NFRK is accumulating foreign assets in safe investments that earn only modest returns.
From an economic point of view, it would be rational in this situation to use NFRK assets to finance the budget deficit.
Reflecting the distinct liquidity needs implied by the fund's roles (financing current development expenditures versus accumulating long-term savings), the NFRK maintains stabilization and savings portfolios with different investment strategies.
The NFRK provides little information on its operations to the public.
3) Kalyuzhnova (2010) discusses recent developments at the NFRK in detail.
The NFRK invests in liquid foreign equities, and will be capitalized by corporate income taxes, VAT, royalties, bonuses, and Kazakhstan's revenues from production sharing agreements.
President Nazarbayev made clear at the outset that resources would not be spent on covering current expenses, but would accumulate in the NFRK for future generations, as well as for the contingency of economic recession.
During the first 5 years of its existence the NFRK has accumulated extra payments made to the republic's budget from major companies operating in the raw materials (oil and gas) sector.
From its conception, the investment strategy of the NFRK was based on the rules governing the foreign exchange reserves of the National Bank of Kazakhstan: eligible assets were low-risk interest-bearing securities (AA-grade or better).
The main objective for the management of both NFRK and SOFAZ is defined to be the investment of capital in such a way that the international purchasing power of the Funds is maximised, taking into account an acceptable level of risk.