Government got sued by association of local internet companies, banks and public organizations with the help of international organizations and foreign governments. On top of they realized how costly that entire plan would be both in terms of economic burden and international image of the country, so they temporarily backed off.
However they have a master switch now to disable most of the social networks and messengers which they already do and entire country's internet access in case of emergency (have not happened yet). There are strong rumors that biggest local provider Kazakhtelecom (basically internet backbone monopolist that owns >90% of physical network ) is actively building several large-scale data centers.
Allegedly they are going to re-route all of the incoming traffic through them and store the data in analogy with US run PRISM. If they successfully complete this step, they will be able to easily enforce MITM countrywide.
Source: me. I am from Kazakhstan. Actively use internet and believe in the freedom of communication and open source initiative. I've been closely following developments in this field, and that's all I know so far.