Fitch Ratings affirms Kazakhstan’s BBB rating

ASTANA – Fitch Ratings has confirmed Kazakhstan’s Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR), evaluating it at BBB with stable outlooks. The issue ratings on the state’s senior unsecured foreign-currency bonds have also been confirmed at BBB and the Short-Term Foreign- and Local-Currency IDRs have been affirmed at F2.


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The rating agency considers the IDR balance reflects strong public and external balance sheets, which are supported by a substantial sovereign net foreign asset position and large government savings. Fitch Ratings experts emphasise the nation’s high commodity dependence, weak banking sector and weak governance indicators and a volatile macroeconomic performance in comparison with BBB peers.

The Kazakh economy is gradually adjusting to the large oil price drop of recent years. Experts report that exchange rate flexibility, financial reforms, restructuring of the state’s banking sector and fiscal stimulus help the economy.

Fitch Ratings forecasts the Kazakh government will have a deficit of up to 7.7 percent of GDP this year. In 2016, the number was 5 percent due to the recapitalisation of Kazkommertsbank, the country’s largest bank. The recapitalisation is considered to be a part of a process that should see Kazkommertsbank acquired by Halyk Bank, the nation’s second-largest bank.

The Kazakh government will decrease the budget deficit in 2018-2019, finishing the Nurly Zhol national programme and reforming the tax code. Deficit reduction will be supported by increasing oil prices, according to the report.

Kazakhstan’s fiscal balance sheet is very strong, showing assets in the National Fund of 45.8 percent of GDP at end of 2016. At the same time, the net government debt was only 22.3 percent of GDP compared with a peer median of 33.1 percent.

The report indicates the country’s commodity dependence is high and lower oil prices led the current account deficit to 6.4 percent of GDP in 2016. The government boosts non-oil exports, but hasn’t yet benefited from exchange rate depreciation.

External balance sheet metrics are very strong. Net external debt was 22.9 percent of GDP at the end of 2016. Fitch Ratings forecasts that net external debt will reach a maximum at the end of 2017 and decline to 20 percent of GDP at the end of 2018.

Macro-financial risks have declined and the inflation targeting regime is gaining credibility. Fitch Ratings experts consider the Kazakh banking sector is very weak and highlight government work on financial sector restructuring and support for Kazkommertsbank.

Real GDP growth was 1 percent in 2016 and 1.2 percent in 2015. Fitch Ratings expects real GDP growth up to 2.2 percent this year due to oil output increase.

Kazakhstan’s top mark was BBB+. Fitch Ratings based its report on the following Brent crude prices: an average of $52.50 per barrel in 2017 and $55 per barrel in 2018.

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